The best-performing and best-regarded funds doesn’t necessarily have to be the most expensive, FE Trustnet has found out.
Indeed, FE Trustnet has discovered there are eight funds investing in Asian and emerging markets equities that hold the maximum number of five FE Crowns and have lower charges than the sector average.
After looking at the investment Association’s UK sector and finding out there are four funds from the main UK sectors with lower OCFs than the median with a top rating, we decided to do the same with the IA Pacific excluding Japan and the IA Global Emerging Market sectors.
To do so, we first calculated the average ongoing charges figure (OCF) – consisting of the annual management charge and other expenses – for every sector in the IA (with data to end of August).
We then filtered the results by rating and were left with only eight funds – out of the 208 funds that reside in both sectors – that have OCFs lower than the median and hold the maximum of five FE Crowns.
Although some funds may have lower charges, we have only included those with the highest ratings awarded by the FE Invest team.
Source: FE Analytics
As the above chart shows, BMO LGM Global Emerging Markets Growth and Income, Smith & Williamson Oriental Growth, Baillie Gifford Emerging Markets Growth, and Quilter Investors Asia Pacific (ex Japan) Large-Cap Equity are some of the value-for-money funds investors can find among the industry’s best regarded strategies.
IA Asia Pacific Excluding Japan
The IA Asia Pacific excluding Japan sector has 103 constituent funds and is home to funds which invest at least 80 per cent of their assets in Asia-Pacific (excluding Japan) equities.
The average ongoing charges figure (OCF) for the sector is 1.05 per cent and there are only four five FE Crown-rated funds that charge investors less than that.
With an OCF of 0.66 per cent, £17m Smith & Williamson Oriental Growth is the cheapest five FE Crown-rated fund in the sector. The strategy aims to achieve long-term capital growth and has been overseen by Jane Andrews since 2011.
Over the past three years, the fund has delivered a total return of 78.66 per cent compared with a 66.81 per cent gain for the MSCI AC Asia Pacific ex Japan index benchmark and a 62.5 per cent return for the average IA Asia Pacific excluding Japan sector peer.
Next up is the £208.2m Quilter Investors Asia Pacific (ex Japan) Large-Cap Equity fund, managed by Invesco Asset Management.
The fund – which focuses on large-cap stocks and has a total of 61 holdings including JD.com, Samsung Electronics or Baidu – has an OCF of 0.85 per cent. Over three years it has delivered a return of 94.05 per cent.
With respective OCFs of 0.89 per cent and 0.90 per cent growth-oriented strategies Janus Henderson Asia Pacific Capital Growth and JPM Asia Growth are the other highly-rated Asian equities strategies with lower charges than their peers.
Janus Henderson Asia Pacific Capital Growth is managed by Janus Henderson’s head of Asia ex-Japan equities Andrew Gillan and has delivered a total return of 73.64 per cent over three years. JPM Asia Growth, meanwhile, is overseen by veteran investors Joanna Kwok and Mark David and is up by 90.21 per cent over the same period.
IA Global Emerging Markets
The IA Global Emerging Markets sector has a total of 105 funds, which invest at least 80 per cent or more of their assets in emerging market equities.
The average fee for an emerging market fund is slightly higher, FE Trustnet research found, standing at 1.10 per cent.
With an OCF of 0.31 per cent, BMO LGM Global Emerging Markets Growth and Income is by far the cheapest five FE Crown-rated fund in the IA Global Emerging Markets sector.
Performance of fund vs sector & index over 3yrs
Source: FE Analytics
The $499.6m fund was launched in 2014 and has been overseen by BMO Global Asset Management subsidiary LGM’s Damian Bird, Irina Hunter and Rishikesh Patel since 2016.
Over three years the fund has delivered a total return of 57.84 per cent compared with a 63.41 per cent gain for the MSCI Emerging Markets index benchmark and a 55.67 per cent return for the average IA Global Emerging Markets sector fund.
Two Baillie Gifford strategies are next on our list of highly-rated funds with lower ongoing charges figure than their peers. The asset manager is well known for absorbing the costs associated with research, which reduces the overall fee paid by investors.
With an OCF of 0.78 per cent Baillie Gifford Emerging Markets Leading Companies is the cheapest of the two.
The £494.9 has been headed up by Will Sutcliffe since 2010 and aims to produce attractive returns over the long term through investment primarily in a concentrated portfolio of the larger and more tradable companies. These include Taiwan Semiconductor Manufacturing Company or Chinese multinational conglomerates Tencent and Alibaba.
The bottom-up, growth-oriented Baillie Gifford Emerging Markets Growth is the next strategy offering value for money.
The £745.7m fund is run by Richard Sneller and Mike Gush’s, who look to identify stocks which will grow faster than the market for a longer duration than the market expects.
The team believe the market is poor at estimating the duration of above average profits growth in companies with a significant competitive advantage.
Baillie Gifford Emerging Markets Leading Companies is up by 83.35 per cent over three years, while the Baillie Gifford Emerging Markets Growth climbed 80.82 per cent higher.
With a slightly higher but still below-the-average OCF of 0.9 per cent, Newton Global Emerging Markets is another highly-regarded strategy.
The fund is also run by an FE Alpha manager, Rob Marshall-Lee and delivered a total return of 55.96 per cent over three years.
Performance of fund vs sector & benchmark over 3yrs
Source: FE Analytics
The £244.1m fund is a thematic portfolio of between 50 and 80 names (with most of the smaller names being less liquid positions) which has a bias to growth orientated companies.
Anaylsts at Rayner Spencer Mills noted: “The strength of the overall research process at Newton, together with a well-resourced emerging market team, should deliver outperformance going forward over the medium term and make the fund worthy of our rating in a universe where investor choice is becoming increasingly restricted.”