This makes it a good time for investors to consider the other options available in the sector.
Our data shows that there are few comparable funds that have managed to produce consistent alpha against their benchmark over the past five years – and even fewer that are still open.
The £4.2bn First State Global Emerging Markets Leaders fund has added 9.5 per cent of annualised alpha against the MSCI Emerging Markets index over the past five years, according to data from FE Analytics, more than all but two true peers.
The £796m First State Global Emerging Markets fund – run by the same team, Jonathan Asante and FE Alpha Manager Glen Finegan – has generated alpha worth 9.52 per cent a year over that time.
Unfortunately for investors, they are both soft-closed.
Annualised alpha over 5yrs
Source: FE Analytics
However, the fund with the best score over that time is still open: the £45.4m McInroy & Wood Emerging Markets fund has generated alpha worth 12.75 per cent against the MSCI Global Emerging Markets benchmark over five years.
The fund has been run by Francis Seymour, David Shaw Stewart and Guido Bicocchi since March 2007 and sits in the top quartile of its sector over one, three and five years.
Over five years it has returned 78.63 per cent, more than three times the 23.61 per cent made by the MSCI Emerging Markets index.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
Despite its strong performance and its five FE Crowns, it receives little attention, although a steep initial investment of £10,000 perhaps explains why.
After the First State funds are portfolios from rival house Aberdeen – which are also soft-closed.
Aberdeen Global Emerging Markets Equity has generated annualised alpha worth 8.57 per cent over the period, while Aberdeen Emerging Markets has managed to produce 8.38 per cent.
Aberdeen implemented a 2 per cent initial charge in March this year to discourage inflows, and is no longer marketing the funds.
The next option that is still available is the £461m Lazard Emerging Markets fund, which has been managed by James Donald since 1997. This fund has produced alpha worth 3.64 per cent over its benchmark on an annualised basis.
It has been a consistent top-quartile performer in the sector for many years, and has the third-best returns over the past decade, at 452.87 per cent.
Over the last five years it has made 43.5 per cent while the MSCI Emerging Markets index has made 23.61 per cent.
Performance of fund vs sector and benchmark over 5yrs
Source: FE Analytics
The fund has more in Latin American than the First State funds and has consistently maintained a large position in Indonesia.
It focuses more on companies that pay a dividend and have a higher total return on equity than the funds from Aberdeen and First State.
The next-best option available to retail investors is the £1.1bn JPM Emerging Markets fund, run by Austin Forey, with Leon Eidelman joining in January of this year.
Over the past five years it has generated alpha worth 0.76 per cent a year against its benchmark.
Funds from BlackRock, Threadneedle and Schroders have also generated positive alpha over the past five years, albeit the 0.36 per cent of the BlackRock fund the highest figure among these.
However, these 11 are the only funds to do so, with all the other portfolios in the sector producing a negative alpha score over the period.
This is with the exception of two smaller companies funds, which are better considered separately.
The leader in this group, Aberdeen Global Emerging Markets Smaller Companies, is also soft-closed.
The $3.4bn fund is the sector-leader in absolute terms over one, three and five years, having returned 135.91 per cent over the longer period.
According to our data it has generated annualised alpha worth 11.55 per cent against the MSCI Emerging Markets Small Cap index over the past five years.
However, it has applied a 2 per cent initial charge in an attempt to slow inflows into the portfolio, which as a smaller companies fund will cause more problems if they become excessive.
Annualised alpha over 5yrs
| Fund | Annualised Alpha over 5yrs |
|---|---|
| Aberdeen Global Emerging Markets Smaller Companies | 11.55 |
| JPM Emerging Markets Small Cap | 0.38 |
Source: FE Analytics
For those unwilling to pay the initial charge, the JPM Emerging Markets Small Cap fund is the next-best option.
The $482m fund has generated alpha worth 0.38 per cent a year over its benchmark over the past five years.
However, the manager Amit Mehta has only been in place since April 2012.