Concerns about the Fed’s tapering, slowing growth, current account deficits and currency weakness have all contributed to the fall in emerging market equities gathering pace this year.
While many experts agree that they could fall further over the coming 12 months, the majority of them also say that the developing world’s long-term growth story remains very much intact.
For anyone looking to make a contrarian call, here are the emerging markets income funds with a track record of less than three years that are top-quartile performers since launch.
Liontrust Asia Income
The nimble £18m Liontrust Asia Income fund – which is co-managed by Mark Williams and Carolyn Chan – is the only portfolio that fitted the criteria from the IMA Asia Pacific ex Japan sector.
According to FE Analytics, the portfolio is the sector’s 10th best performer since its launch in March 2012 with returns of 9.01 per cent. Its MSCI Asia Pacific ex Japan index benchmark made just 0.52 per cent over this time.
Performance of fund vs sector and index since Mar 2012
Source: FE Analytics
It has also shielded capital more effectively than the index and its competitors in the recent volatility, and is a top-quartile performer over 12 months – even though it has still lost 4.49 per cent.
Liontrust Asia Income has a decent 4.59 per cent yield. As Williams recently told FE Trustnet, he and Chan look for income outside of the index’s largest dividend-payers.
For example, the fund doesn’t have exposure to Taiwan Semiconductor – which is a top-10 holding in 44 of 89 funds in the sector.
Financials and industrials are the fund’s largest sector weightings, though the managers also hold 5 per cent cash. It has an ongoing charges figure (OCF) of 2 per cent and requires a minimum investment of £1,000.
Polar Capital Emerging Markets Income
There are currently three unrated funds from the IMA Global Emerging Markets sector that are top-quartile performers since launch. One is Polar Capital Emerging Markets Income, which is domiciled in Ireland.
Although it was launched in January 2011, the portfolio has already grown to $595m. It is headed up by the experienced William Calvert, who managed the AXA Framlington Emerging Markets fund between 1997 and 2010.
Calvert’s fund is the sector’s ninth-best performer over three years with returns of 2.81 per cent. Its MSCI Emerging Market benchmark and the sector average have lost more than 13 per cent over this time.
It has, however, fallen further than the sector and the index over the last year.
Polar Capital Emerging Markets Income has a yield of 4 per cent.
Sector overweights include industrials, consumer discretionary and utilities. Relative to the benchmark, Calvert is also overweight Brazil and Russia and underweight China and India.
The fund’s OCF is 1.74 per cent.
Standard Life Global Emerging Markets Income
Mark Vincent's Standard Life Global Emerging Markets Income fund also sits at the top end of the table since its launch in December 2012.
It is the third best performing portfolio in the sector over that time, although it has only returned 1.35 per cent. The IMA Global Emerging Markets sector, which is also its benchmark, has lost 9.35 per cent over this time.
Performance of fund vs sector since Dec 2012
Source: FE Analytics
The £296m fund is also a top-quartile performer over 12 months. However, it has a lower yield – 2.79 per cent – than the majority of its rivals.
Standard Life Global Emerging Markets Income is a diversified portfolio of more than 100 holdings.
The financial sector is the fund’s largest sector weighting. Vincent counts Bank of China, Bank of Georgia and ICBC (Industrial & Commercial Bank of China) – which is the world’s largest bank in terms of total assets and market capitalisation – as top-10 holdings.
It has an OCF of 1.69 per cent and requires a minimum investment of £1,000.
UBS Emerging Markets Equity Income
The final fund on the list is UBS Emerging Markets Income, which is headed up by the management duo of Urs Antonioli and Projit Chatterjee.
The £112m fund was launched in January 2011. FE Analytics data shows it has comfortably beaten both the sector and the MSCI Emerging Markets index over that time, even though it lost 5.72 per cent.
Performance of fund vs sector and index since Jan 2011
Source: FE Analytics
UBS Emerging Markets Income has an above-average 5.5 per cent yield.
It is a firm favourite with Toby Ricketts, who has a relatively high exposure to it in his Margetts Venture Strategy fund.
Telecoms are Antonioli and Chatterjee’s favoured sector, with a 10 per cent active position relative to their benchmark. UBS Emerging Markets Income is also slightly overweight utilities and financials.
The fund is biased towards Asia, with companies listed in the region making up more than half of its assets.
It has an OCF of 1.25 per cent and requires a minimum investment of £1,000.
