Since these funds have topped the tables in their respective sectors, investors can often be left high and dry, searching for another manager to replace one whose track record put their mind at ease.
Ben Willis, head of research at Whitechurch Securities, offers five alternatives to funds that have either closed to new money or have started to discourage inflows.
Aberdeen Emerging Markets and First State Global Emerging Markets Leaders
Over the last decade, Aberdeen and First State have been the undisputed leaders in emerging markets, picking up billions upon billions of pounds in their flagship funds.
However, both firms have increased initial charges regardless of whether investors already have a position in their funds – to 2 per cent for Aberdeen and 4 per cent in the case of First State – causing many investors to look elsewhere for access to the high-growth sector.
Willis (pictured) says Whitechurch previously held Aberdeen Emerging Markets in clients’ portfolios and says it was a "real head-scratcher" when the firm moved to stem inflows.
"You could see the same thing was going to happen with First State, so you didn’t want to jump from Aberdeen to First State and then jump again," he said. Instead, Willis has opted to split his emerging markets exposure between growth and income elements, selecting the Templeton Emerging Markets investment trust for growth and the open-ended JP Morgan Emerging Markets Income fund for the yield.
Both funds have been hit by the sharp fall of emerging markets in the recent correction, but the JP Morgan fund has protected better than its peers, delivering top-quartile returns over the last six months.
The four crown-rated Templeton IT also has a strong five-year track record, picking up 44.89 per cent.
Over the last year, the JP Morgan fund has made 3.11 per cent while the MSCI Emerging Markets index has lost 0.74 per cent. The Templeton trust lost 1.18 per cent over the period.
Performance of fund vs index and sector over 1yr
Source: FE Analytics
The Templeton trust is yielding 1.2 per cent while the JP Morgan portfolio is paying out 3.83 per cent.
JP Morgan Emerging Markets Income requires a minimum investment of £1,000 and has ongoing charges of 1.68 per cent. The Templeton Emerging Markets IT is trading on a discount of 7.9 per cent and has ongoing charges of 1.31 per cent.
Fidelity UK Smaller Companies
FE Alpha Manager Alex Wright has been one of the best-performing UK Smaller Companies managers over the last three years, but his five crown-rated fund is no longer open to new money.
Fidelity closed Fidelity UK Smaller Companies in April this year, as it neared £250m in size.
Willis says he likes the £96.7m Aberforth UK Small Companies fund as an alternative, run by a team of six small cap experts.
While the fund has not been a shoot-the-lights-out leader over the medium-term, it has consistently outperformed the IMA UK Smaller Companies sector, though lagged the Numis Smaller Companies ex ITs index, over five and 10 years.
Over the last 12 months the fund has delivered top-quartile returns of 37.75 per cent while the sector made 32.06 per cent. The index picked up 37.18 per cent.
Performance of fund vs sector and index over 1yr
Source: FE Analytics
The highest sector weighting in the fund is to industrial companies, at 34 per cent, followed by services and financials stocks.
The fund requires a minimum investment of £1,000 and has a total expense ratio (TER) of just 0.86 per cent.
Trojan Income
While investors who already have money in FE Alpha Manager Francis Brooke’s five crown-rated Trojan Income fund can continue to top up their holdings without additional fees, the fund is closed to new money.
"The benefit you have from Francis Brooke is that he has excellent risk-adjusted returns. If you’re looking for that kind of return, you’ll want something like Neil Woodford or Artemis Income," Willis said.
He adds that even though both the Artemis Income and Invesco Perpetual High Income portfolios are massive, they are scalable and consistent – something income investors need at the cornerstone of their UK equity income exposure.
Both funds have consistently outperformed the IMA UK Equity Income sector over the medium- to long-term.
Over the last decade, the five crown-rated Invesco fund has made 222.44 per cent while the four crown-rated Artemis Income fund is up 161.43 per cent. The IMA UK Equity Income sector and FTSE All Share made 123.27 per cent and 132.92 per cent over this time, respectively.
Performance of funds vs sector and index over 10yrs
Source: FE Analytics
Invesco Perpetual High Income requires a minimum investment of £500 and has ongoing charges of 1.69 per cent, while the Artemis fund requires a minimum investment of £1,000 and has ongoing charges of 1.54 per cent.
Cazenove UK Opportunities
Earlier this year, Cazenove announced its intention to stem inflows into FE Alpha Manager Julie Dean’s outperforming Cazenove UK Opportunities fund.
While this has not translated into an all-out soft-closure, investors may need another option if the fund does decide to increase its fees, says Willis.
He says one of the best alternatives to Dean’s fund would be Richard Buxton’s Old Mutual UK Alpha portfolio, which he took over after moving to Old Mutual from Schroders this summer.
The fund has been a strong performer over the last one and three years, and while Buxton has only recently joined Old Mutual, his track record speaks for itself – having outperformed his peers over the last one, three, five and 10 years.
Over the last 12 months, the Old Mutual fund has made 37.28 per cent while the IMA UK All Companies sector is up 23.63 per cent. The FTSE All Share gained 18.3 per cent.
Performance of fund vs sector and index over 1yr
Source: FE Analytics
Templeton Frontier Markets
Mark Mobius’ five crown-rated Templeton Frontier Markets fund is now $2.2bn in size, leading Franklin Templeton to announce plans to soft-close it.
Willis says the best alternative is Sam Vecht’s BlackRock Frontiers Investment Trust, which is trading on a premium of 1.3 per cent.
It has consistently outperformed the IT Global Emerging Markets Equities sector and MSCI Frontier Markets index since launch in December 2010.
It has made 10.22 per cent in this time compared with 3.96 per cent from the index and losses of 6.52 per cent from its peers.
Performance of trust vs sector and index since launch
Source: FE Analytics
The trust is yielding 2.7 per cent and is geared at 5 per cent. It has ongoing charges of 2.14 per cent, including a performance fee.
