Investors should focus more on value as opposed to cost when positioning their portfolios, according to Simon Evan-Cook (pictured). 
The manager, who co-runs a number of funds including Premier Multi-Asset Global Growth and Premier Multi-Asset Growth & Income, says that while charges do affect an investors overall return, higher costs shouldn’t necessarily dissuade them from holding or buying a fund as they are likely to be missing out on good long-term opportunities.
“I think it’s something that quite often gets lost in the current environment - people just look at the price and not the value of a fund,” he said.
As such, Evan-Cook gives FE Trustnet three funds that have more than made up for their high ongoing charges with their strong performances.
This ethos rings particularly for these three funds, as they are soft-closed and would therefore be more difficult to buy back into if an investor were to sell them.
Fidelity FAST Emerging Markets
Managed by FE Alpha Manager Nick Price since the fund’s launch four years ago, the offshore Fidelity FAST Emerging Markets fund is Evan-Cook’s largest holding in his Global Growth portfolio.
“There has been a lot written about active share over the last few years, and fund has an active share of more than 100 per cent, which seems odd but it’s a long/short fund and that enables them to have more than 100 per cent exposure,” he explained.
“The manager is very active on his long book but he’s also very active on the short book too. Price’s approach is very much fundamentals-driven and bottom-up, and he chooses very good companies that are trading on attractive prices.”
Since its launch, the five crown-rated fund has returned 34.1 per cent, compared to its MSCI Emerging Market benchmark’s loss of 1.02 per cent and its peer average in the FO Emerging Market sector’s loss of 4.18 per cent.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
Over the same time frame it also boasts a top-quartile annualised volatility, a top-quartile Sharpe ratio, which measures risk-adjusted returns, and a top-quartile maximum drawdown, which measures the most an investor would have lost if they’d bought and sold at the worst possible times.
“It’s got a very good track record and since we’ve bought that fund Price has done an extremely good job for us,” Evan-Cook continued.
“The fund is more expensive than his long-only global emerging markets fund but, after charges, it has outperformed it since we purchased it, so in our book that justifies why we pay more for that fund - we’re getting better value despite the fact the cost is higher.”
The manager adds that running a long/short fund requires a specific skillset, and that it can add extra value versus many long-only funds.
Fidelity FAST Emerging Markets aims to provide long-term growth through shares and related investment vehicles through companies that are either listed, have their head office in, or have a main part of their activity within global emerging markets.
The $1.3bn fund has an ongoing charges figure (OCF), which also takes into account annual management charge, of 2.01 per cent. It also charges a performance fee of 20 per cent if the fund outperforms its benchmark by more than 2 per cent on an annualised basis.
Next on the list is Prusik Asian Equity Income, which is also offshore and has a five-crown rating. It has been managed by Tom Naughton since its launch in 2010, who has more than 15 years’ experience in Asian fund management.
“We pay 1 per cent AMC for that fund,” Evan-Cook said. “We tried to negotiate a lower price but they were confident in their pricing and confident in the quality they were offering.”
“The fund has since justified that slight extra cost with exceptional returns over its benchmark and peer group.”
Since its launch, Prusik Asian Equity Income has outperformed its MCSI Asia Pacific ex Japan benchmark by more than 17 times and has outperformed its peer average in the FO Equity Asia Pacific ex Japan sector by more than 34 times.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
Like Fidelity FAST Emerging Markets, it is also in the top quartile for its annualised volatility, Sharpe ratio and maximum drawdown over this time frame.
Naughton looks to find stocks in the Asia Pacific ex Japan region that have both above-average dividend yields and the ability to grow these dividends over time.
He does this through a portfolio of stocks spanning across sectors including Telecom, media & technology, which is the fund’s biggest weighting at 32.8 per cent, as well as transport, financials, consumer products and utilities among others.
Prusik Asian Equity Income has a clean OCF of 1 per cent and yields 3.7 per cent.
Managed by King Fuei Lee and FE Alpha Manager Robin Parbrook since its launch in 2008, Schroder Asian Total Return looks to offer investors a degree of capital preservation as well as aiming to provide both growth and income.
Since its launch, it has returned 142.49 per cent, outperforming its MSCI Asia Pacific ex Japan benchmark by 82.6 percentage points. It sits in the IA Specialist sector, but it has managed to outperform the IA Asia Pacific ex Japan sector average by 81.17 percentage points
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
“We paid a little bit more for this fund and it’s the same story as the other funds,” Evan-Cook explained.
“The fund is slightly more complicated and they have been prepared to limit the supply of it in a similar way that the Prusik fund has. When something is in limited supply I think you can justify charging more for it.”
As well as having to invest at least two-thirds of the fund in Asia Pacific equities, the managers also use financial derivative instruments (FDIs) to offer some capital protection and have the ability to hedge.
The £1.4bn fund can also invest directly in China B-Shares and China H-Shares, and can also invest up to 10 per cent in China A-Shares through the Shanghai-Hong Kong Stock Connect.
Currently, Schroder Asian Total Return has 64 holdings, 71.89 per cent of which is invested in the Pacific Basin while the rest of the fund is allocated to elsewhere in Asia Pacific and in the US.
The fund has an ongoing charges figure of 1.93 per cent and yields 0.58 per cent.
