The top 20 largest funds in the industry are popular for good reason.
Managers of such funds boast a long-term track record of consistent and lucrative returns, and a plethora of loyal investors unwilling to part with a more-or-less guaranteed supply of steady income.
So when these funds become so sizeable the products need to be soft-closed, or the manager is forced to transform his original strategy, a dilemma ensues. In some cases there are a range of alternatives available, but in others, particularly within less liquid or niche sectors, it can become difficult to find a viable replacement.
A timely example is the recent announcement of Aberdeen Asset Management’s soft-closure of its £3.7bn Global Emerging Markets fund, run by Devan Kaloo. The group is set to introduce a 2 per cent initial charge from March 11 2013, in an attempt to stem flows into the product. The closure presents a problem for some investors, as a common complaint from within the retail investment community is the lack of viable options within the global emerging markets (GEM) space.
Mr Bamford recommends using JP Morgan Emerging Markets fund as a suitable alternative to the Aberdeen GEM product. The fund has been managed by Austin Forey for more than 15 years.
“The fund had a good year in 2012, outperforming as a result of good stock selection decisions in domestic markets and being overweight in financials, with a consumer focus. With £1.1bn of assets, this fund should not face the same type of liquidity pressures as Aberdeen or First State,” notes Mr Bamford.
Ben Willis, investment manager at Whitechurch Securities, also recommends JP Morgan’s Emerging Markets fund and the £2bn Templeton Emerging Market Investment Trust, run by Mark Mobius, as alternatives.
“This is a trust [Templeton EM IT] that we have invested in and out of for some time and is one of the alternatives that can demonstrate a solid long-term track record, while the trust is currently running at a discount,” adds Mr Willis.
In contrast to the GEM sector, investors looking to invest in funds with an Asia-Pacific tilt have a more generous range of options available. So investors concerned over the soft-closure of First State’s £7.2bn Asia Pacific Leaders fund, for example, have a range of alternatives such as Aberdeen’s £2.5bn Asia Pacific offering, run by Hugh Young and Newton’s £3.4bn Asian Income fund, managed by Jason Pidcock.
On the fixed income side, industry behemoths include the £11.2bn M&G Optimal Income fund, managed by Richard Woolnough.
Paul Greaves, chartered financial planner at financial advisers Hart Greaves, recommends M&G’s £349.8m Global Macro Bond fund, managed by Jim Leaviss, as a “logical alternative” to Mr Woolnough’s Optimal Recovery fund.
“Using the M&G Global Macro instead of Optimal Income fund gives access to the same fixed income team but with a wider global mandate,” he says.
