InvestmentsMay 20 2013

First State inflow curbs ‘to benefit EM rivals’

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ByBradley Gerrard

Rival fund groups in the emerging markets space could attract extra business as another huge fund is set to levy high initial charges to deter new investors.

First State Investments announced last week that it will soft-close Jonathan Asante’s Global Emerging Markets Leaders funds to new investments in September, although regular savers will not be affected.

The asset manager, which had previously soft-closed a number of other funds run by the First State Stewart Asia Pacific and Emerging Markets team, said it will impose a 4 per cent initial charge on new investors who buy the onshore version of Mr Asante’s fund from September 7 2013.

At the same time, the firm will stop all new inflows into the $1.3bn offshore First State Global Emerging Markets Leaders fund, run under the same strategy by Mr Asante.

The move comes after Aberdeen Asset Management also sought to quell investors’ appetite for its Emerging Markets fund by raising fees for new investors to 2 per cent.

The rise in charges on the two most popular funds in the sector, which have both produced top-quartile returns in one, three and five-year periods, has diverted attention to rival funds that could benefit from investors who are keen to gain exposure to emerging markets funds with standard charges.

HFM Columbus’ investment director Rob Pemberton said the increased use of model portfolios by financial advisers and wealth managers had been a boon for the “large, established winners” that “tick all the necessary boxes” in terms of past performance and sound processes.

“Once a fund moves out of the shadows and onto the fund selectors’ radar, the inflow of new monies can be substantial,” Mr Pemberton said.

He added that the newly reopened Lazard Emerging Markets fund is now a “viable candidate in a sector where some of the biggest and best funds are already closed”.

Peter Fitzgerald, co-head of multi-manager at Aviva Investors, said he used to hold the Aberdeen Emerging Markets fund but sold out when the fund soft-closed this year.

He believes there is a “shortage” of global emerging market funds that have performed as well. However, he thinks regional funds could find support from investors.

The manager said he favours the Schroder Asian Alpha Plus fund run by Matthew Dobbs, José Luis García’s MFS Latin American Equity fund and Sam Vecht’s BlackRock Emerging Europe fund.

Elsewhere, Adrian Lowcock, senior investment manager at Hargreaves Lansdown, said finding a good emerging markets manager has “become harder” now the First State fund had soft-closed.