3 July 2012
Global emerging markets funds delivering stellar returns – but only if you pick the right fund
Moneyspider.com’s latest data reveals three quarters of all emerging market funds under-performed in last three years – but First State and Aberdeen power ahead
A two horse race as the front runners easily leave the nags behind
First State turns £5,000 into £8,700 in three years
Aberdeen not far behind as A rated funds continue to reward investors – but watch where you put your money, warns Moneyspider.com – or you could lose your shirt
Territory based research teams the key to top returns in high risk sector
INVESTORS WHO have held their nerve and stayed in emerging markets funds despite the ups and downs of global stock markets have been well rewarded, according to new data from online investment research analysts Moneyspider.com.
But only if they have selected the right funds. Because while there are a handful of stellar performers within this higher risk sector, the majority of funds – more than three quarters – are relegated to Moneyspider.com’s C/E ratings (please see editor’s notes for full explanation on how MS.com’s ratings system works).
Investors who have been fortunate to opt for top-flight fund managers such as First State Investments have seen their choices pay off handsomely.
First State’s Global Emerging Markets fund for example returned £8,715 on a £5,000 investment over three years in the period May 2009 to May 2012. And Aberdeen’s popular Emerging Markets Fund was not far behind with £8,027 over the same period.
Both funds are A rated, but while the top performers in the sector are dominated by the likes of First State and Aberdeen, there are far more lame duck funds in this sector than alpha performers.
Of the 41 funds which Moneyspider.com monitors within the sector, the vast majority, 73.2 %, are in the average to below average C- E range of the moneyspider.com rankings system – most investors in these funds may not have lost money, but they will have lost out on the rewards fielded by the top performers.
Just 26.8 per cent carried the Moneyspider.com A/B ratings – so investors need to choose their fund wisely, paying particular attention to relatively short term performance, said Tony Ahearne, Moneyspider.com director.
“Emerging markets funds are currently providing some of the most attractive returns of all the equity investment fund sectors, but performance between the best and the worst of the managers in this sector fluctuates wildly.
“As market conditions vary so intently in many of the developing countries, investors need to be aware of the fund manager’s ability to spot the potential for short term profits and then pulling out and moving on,” he said.
Emerging markets now account for about a third of global GDP – but only around 10% of world stock-market holdings.
“Most investors are relatively under-exposed to emerging market funds,” said Ahearne, but as they are generally considered to be at the higher end of the risk spectrum there is understandable caution.
“Most financial advisers will typically recommend around 5 per cent of the average investor’s portfolio is held in emerging market funds.
“But in some circumstance the less risk averse investor may want to increase their exposure – especially given some of the returns we are seeing in the sector.
When planning which fund to go into, Ahearne recommends looking at how the fund manager has structured its investment managers.
“Aberdeen for example has always fielded one of the strongest emerging markets teams, and it is the sign of a good fund manager when they have a number of teams split into regional specialists – in this case based in Singapore, Hong Kong, Bangkok and Kuala Lumpur.
“Our research suggests that it is currently a two horse race between Aberdeen and First State, but investors should be sure that the fund which they ultimately choose has good exposure to India.
“It is a massive market with around 9,000 quoted companies, making it very appealing for stock pickers. India has a rapidly expanding middle class, a thriving export economy and with English widely spoken is likely to become more attractive than China,” added Ahearne.
While some funds are clearly attractive, Ahearne warned that investors had a “high chance” of getting it wrong unless they carefully researched respective fund manager performance.
“Some fund managers actually run funds within the same sector which deliver a superior performance. We cannot stress how important it is to look not just at how the fund is performing against rival managers within the sector, but also with other funds fielded by the investment manager within the same stable.
“It could be the difference between making thousands of pounds – or losing thousands of pounds.”
Moneyspider.com analysed data on 41 Global Emerging Markets funds on 26 June 2012 in conjunction with Financial Express
The value of investments and income from them may go down. You may not get back the original amount investment.
Emerging Markets: Some funds will carry greater risks in return for higher potential rewards. Investment in emerging market funds can involve greater risk than is customarily associated with funds that invest in developed, more established markets. Above average price movements can be expected and the value of these funds may change suddenly.
Further details on the mechanics of Moneyspider.com can be found at www.moneyspider.com.
Tony Ahearne, Director 020 7630 9696 / 07765 433358
Mark Cotton, Consultant 01273 711567 / 07875 385 370
David Andrews, Director 01273 711567 / 07941 255855
Moneyspider.com was launched in April 2004 and is an independent investment research and information company for private investors. Moneyspider.com constantly monitors all 2,000 or so funds available to UK investors and provides online personal reports that are updated on a daily basis showing current valuation and performance of all funds in one place.
The Moneyspider service is provided to those investors who have or are thinking about purchasing Unit Trusts or OEICs (Open Ended Investment Companies) including stocks and shares ISAs. Moneyspider doesn’t move or change the investments in any way; they remain as they are – with the same Fund Managers.
The Moneyspider Rating® provides a unique assessment of the performance of each fund measured against four key parameters
▪ Sector ranking: a comparison with all other funds in the same sector as your
fund (based on the sector definitions used by the Investment Management Association).
▪ All funds ranking: a comparison with all other 2000 or so Unit Trusts and
Open Ended Investment Company funds available to UK investors.
▪ FTSE 100: a comparison of the total return of the fund with the total return of
the FTSE 100 index (comprising the UK’s 100 largest companies), providing
a consistent benchmark for each fund.
▪ Cash: a comparison of the fund’s performance with the return from an
equivalent amount deposited in a 90 day non-high interest access account.
Moneyspider.com’s unique computer system calculates the results, with specific weightings allocated to each of the four categories, with each one analysed and compared over 1, 3 and 5 years. Although the rating is generated from a highly complex, computer-based performance analysis, involving 34 separate computations, it produces a simple and straightforward result; scoring each of your funds from A (a very high rating) to E (a distinctly poor rating).
Behind these easy-to-understand ratings is a percentage score, which is calculated to four decimal points. Each day Moneyspider.com’s system calculates this percentage score for every single one of the 2000 or so funds on our database, thus providing a comprehensive ranking for all funds. The ‘Rank in Sector’ for each fund on the Moneyspider Report, is based on the ranking of these percentage scores.
Through Moneyspider, investors can not only monitor their investments but they can also buy and switch funds, with 50% of all commission charges being rebated to the customer.
Moneyspider.com is an appointed representative of Anthony, Bryant & Company (Investment Consultants) Limited of 25 Eccleston Square, London SW1V 1NS, which is authorised and regulated by the Financial Services Authority. The contents of this press release are not intended, and should not be construed as, advice, a recommendation or as an inducement to buy or sell any investment. Moneyspider.com relies on information regarding investments that is provided by third parties and accepts no liability (including that arising from negligence) for the accuracy of such information.