However, there are many lesser-known funds that can deliver similar if not better returns over the long-term.
FE Trustnet looks at five hidden gems that can replace the fund giants in investors' portfolios.
Baring ASEAN Frontiers
With First State having closed its Asia Pacific and Asia Pacific Sustainability funds, and considering stemming inflows into First State Asia Pacific Leaders, investors have to look elsewhere for exposure to the region.
Although it sits in the unpopular IMA Specialist sector, the Baring ASEAN Frontiers fund would be the second-best performing fund in the IMA Asia Pacific ex Japan sector over three years, behind only Newton Asian Income.
| Name | Baring ASEAN Frontiers |
|---|---|
| Fund size | $758.9m |
| Min. invesetment | £2,500 |
| Yield | N/A |
| OCF | 1.85% |
| Manager | Soo Hai Lim |
| Crown rating | 5 Crowns |
Source: FE Analytics
The five crown-rated Barings fund has beaten each of the First State funds over three years, as well as Aberdeen Global Asian Smaller Companies.
Since launch in August 2008, the fund has made 146.39 per cent, compared with 128.97 per cent from the MSCI South East Asia index and 70.12 per cent from the IMA Asia Pacific ex Japan sector.
Performance of fund vs sector and index since launch
Source: FE Analytics
The fund, managed by Soo Hai Lim, seeks long-term growth through investment in Asian companies such as Thai bank Kasikornbank, Bank Rakyat Indonesia and Singapore Telecommunications.
In a similar vein to the First State portfolios, the fund has a heavy weighting to financials, at 40.7 per cent of the portfolio. It also has 20.5 per cent in consumer products stocks.
Franklin UK Smaller Companies
Now that the current top-performing portfolio in the IMA UK Smaller Companies sector – FE Alpha Manager Alex Wright’s Fidelity UK Smaller Companies fund – has soft-closed after taking on huge inflows in the past several months, investors need to find the next fund that can deliver solid returns.
With small cap portfolios, the strongest performance often comes when the fund is smaller – and therefore more nimble – in size.
Although the tiny Franklin UK Smaller Companies fund is languishing in the bottom-quartile over the medium- and long-term, it has been completely transformed since FE Alpha Manager Paul Spencer and Richard Bullas took over last June.
| Name | Franklin UK Smaller Companies |
|---|---|
| Fund size | £22m |
| Min. invesetment | £1,000 |
| Yield | 0.27% |
| OCF | 1.70% |
| Manager | FE Alpha Manager Paul Spencer & Richard Bullas |
| Crown rating | 1 Crown |
Source: FE Analytics
The duo have made large-scale changes to the portfolio, stripping out mining exposure and building a highly concentrated, high-conviction portfolio of 40 to 50 stocks.
The fund has seen a dramatic turnaround in performance, returning 23.03 per cent over the past six months alone, making it one of the best performers in the sector over this time.
It also beat the Numis Smaller Companies ex ITs index, which made 20.58 per cent, according to FE Analytics.
Performance of fund vs sector and index over 6 months
Source: FE Analytics
The largest weighting in the fund is to industrials, at 37.79 per cent. The top holding in the portfolio is inkjet print-head supplier Xaar, which makes up 5.24 per cent of AUM.
Royal London UK Equity Income
The outperforming Trojan Income fund soft-closed last month, meaning investors need to look elsewhere for income.
The four crown-rated Royal London UK Equity Income fund has a headline yield of 3.72 per cent, and is one of the most consistent performers in the IMA UK Equity Income sector over the last decade.
| Name | Royal London UK Equity Income |
|---|---|
| Fund size | £448.4m |
| Min. invesetment | £1,000 |
| Yield | 3.72% |
| OCF | 1.30% |
| Manager | Martin Cholwill |
| Crown rating | 4 Crowns |
Source: FE Analytics
It is a top-quartile performer over one, three, five and 10 years, and over one, three and six months – the only fund in the sector to achieve this.
At just £448.4m in size, it does not have the kind of liquidity concerns that can plague the multi-billion pound UK Equity Income funds.
Over the last decade it has returned 170.04 per cent, compared with 149.58 per cent from the FTSE All Share and 135.95 per cent from the sector.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
Manager Martin Cholwill is backing major UK income-payers such as HSBC, Royal Dutch Shell and AstraZeneca.
The fund’s two biggest sector bets are industrials and financials, at 26.4 per cent and 23 per cent respectively.
Schroder Asian Income
While Newton has yet to discuss soft-closing its five crown-rated Asian Income fund, the portfolio has swelled to £4bn in size in recent months, raising the likelihood the firm will need to manage inflows into the product.
However, investors can access similar returns from the much smaller £370.1m Schroder Asian Income fund.
| Name | Schroder Asian Income |
|---|---|
| Fund size | £370.1m |
| Min. invesetment | £1,000 |
| Yield | 3.77% |
| OCF | 1.70% |
| Manager | Richard Sennitt |
| Crown rating | 5 Crowns |
Source: FE Analytics
Although the portfolio has a slightly lower yield – 3.77 per cent compared with 4.38 per cent from its Newton counterpart – it has consistently outperformed the IMA Asia Pacific ex Japan sector over one, three, five and 10 years.
Over the last five years, it has gained 81.56 per cent, compared with 44.32 per cent and 44.52 per cent from the sector and MSCI Asia Pacific ex Japan index, respectively.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
The Newton Asian Income fund made 112.78 per cent over the period.
Schroder Asian Income's highest single stock weighting is to emerging markets heavyweight Taiwan Semiconductor Manufacturing.
It highest sector weighting is to financials, at 36.63 per cent, and it holds the likes of Australia & New Zealand Banking Group, Bank of China and HSBC in its top-10.
Somerset Emerging Markets Dividend Growth
Emerging markets territory is dominated by giant funds from Aberdeen and First State, the bulk of which are soft-closed.
While few if any funds have been able to replicate the performance of the giants, investors may want to consider a different, income-oriented approach to this area of the market, particularly as many financial experts agree emerging markets companies are seeing the light when it comes to dividends and increasing their payouts to shareholders.
One play on this theme is the £205m Somerset Emerging Markets Dividend Growth fund.
Outside the small to mid cap focused McInroy & Wood Emerging Markets, the Somerset portfolio is the best-performing fund behind the Aberdeen and First State vehicles over three years.
Since launch in March 2010, it has made 29.9 per cent compared with 8.26 per cent and 7.57 per cent from the IMA Global Emerging Markets sector and MSCI Emerging Markets index, respectively.
Performance of fund vs sector and index since launch
Source: FE Analytics
The fund has an attractive yield of 3.3 per cent.
While managers Edward Lam and Edward Robertson are backing some emerging markets giants such as Taiwan Semiconductor Manufacturing, they also own some more unique names such as South African packaging company Nampak and Chilean beverage company Compania Cervecerias Unidas.