It has grown to £7.8bn in size and in the meantime has won five FE Crowns and found its way on to the FE Select 100 list of top funds.
This makes its recent underperformance a concern to many thousands of investors – particularly as the current market is the type the fund is supposed to excel in.
Managed by Angus Tulloch (pictured) and Alistair Thompson, the portfolio is particularly well known for its performance in down markets – as are the funds of main emerging markets rival Aberdeen.
Data from FE Analytics shows that the fund was the second-best out of 62 in 2008: while the average fund in the sector lost 33.12 per cent, it was down just 16.21 per cent. Again in 2011 when the average fund in the sector lost 16.78 per cent, it was second-best in the sector, losing just 7.98 per cent.
In years when markets have rallied, the fund has consistently performed just above its peer group average, producing second-quartile returns.
Overall, this behaviour means that it has provided investors some of the best risk-adjusted returns in the sector, with a top-decile Sharpe ratio and volatility score.
Over the long-term, this performance profile has repaid investors in spades. The fund has returned 314.83 per cent since launch in 2003 while the average fund in the sector has made just 203.82 per cent.
Performance of fund vs sector and index since 2003
Source: FE Analytics
Over five years it is no longer in the top quartile of the sector, as the 2008 crash has slipped off the radar, but its outperformance in 2011 means that it is still top-quartile over three.
However, the past year has seen a worrying break in the fund’s typical behaviour, according to FE data.
Over the past 12 months it is bottom quartile, having returned just 6.81 per cent to the sector’s 10.73 per cent. The MSCI AC Asia Pacific ex Japan sector has made 12 per cent exactly.
Performance of fund vs sector and index over 1yr
Source: FE Analytics
This is concerning, as the only calendar year in which the fund produced bottom-quartile returns was 2009, when markets rebounded sharply from 2008 and the stocks that had been hammered in that year recovered.
First State Asia Pacific Leaders underperformed because it hadn’t lost anywhere near as much in the first place, and it was buying more secure, all-weather stocks.
So is the current underperformance a sign that the managers have lost their touch?
FE Research analyst Charles Younes (pictured) says that a period of underperformance is not necessarily a problem, as long as the managers' style has remained consistent.
He says he was surprised to see the fund lag behind its peer group in this environment, though. "It did very well up to June but August and September were very poor months," he said. "I was surprised by the performance in August."
"Most of the time when the market is rising the fund will capture the upside, but not 100 per cent, but then on the downside it outperforms. But in August it lost 5.16 per cent when the market was flat."
He adds the fact that the fund has 8 per cent in cash means that losing 5 per cent is a particularly poor result.
Younes says the fund has been increasing its active positions, including an overweight to healthcare and underweight to financials.
Asset allocation is the main reason for the fund's underperformance, according to Younes
The fund is overweight in telecoms and utilities, both of which performed poorly in August, while financials, in which the fund is underweight, did reasonably well.
The major drag on performance was the materials sector. The fund is very underweight this area, holding just 3.9 per cent to the index’s 9.4 per cent.
The materials sector is made up of commodities and miners, which had performed poorly in recent years.
Being underweight had previously served the fund well. However, there was an uptick in data from China in August and September, which led to this sector rallying from a very poor start.
Funds that have been closer to the index would have prospered from this turnaround, although it remains to be seen whether this is a lasting shift.
Country allocation has also been a problem for the fund. The managers are overweight India, with 15.9 per cent in the country compared with 5.6 per cent from the index.
The Indian market was one of the worst-hit by the sell-off in emerging markets caused by the first hints of an end to QE over the summer, while a dysfunctional political system hasn't helped either.
Performance of indices over 1yr
Source: FE Analytics
Younes says he is not concerned by the managers retaining this overweight, and he thinks it is reasonable that they back themselves in that market.
"Indian valuations are very low and they run a fund in the country, so they believe they have good expertise there," he said.
He notes that South Korea was a surprise top-performer over the period, and the managers are underweight there too.
Younes says he is not concerned by these asset allocation problems as stock selection is still very good.
"Most important to me is stockpicking and if you look at the top 15 holdings, they have all hit their earnings targets for the year," he said.
"Looking at the top 15 holdings, the stockpicking did OK, none of them were very disappointing, although Taiwan Semiconductor sales were below expectations. Hong Kong and China Gas did go down 10 per cent, but in general stock selection was good."
Taiwan Semiconductor is the fund’s sixth-largest holding, making up 3.5 per cent of the portfolio, while Hong Kong & China Gas is fourth with 4.1 per cent.
However, Younes says that holders of the fund should certainly be keeping an eye on it over the next few months.
"If there’s another month like August, I would be worried because that’s not the way a fund like this is supposed to behave," he concluded.
