Aim: Growth by investing in Chinese and Indian equities and equity related instruments
Minimum investment: Lump sum £10,000, Isa £7,000
Investment split: 24% consumer goods, 21% basic materials, 15% consumer cyclicals, 8% energy, 7% financials, 6% healthcare, 6% consumer staples, 4% technology, 4% utilities, 3% telecommunications, 2% cash
Isa link: Yes
Pep transfers: Yes
Charges: Initial 5%, annual 1.75%
Commission: Initial 3%, renewal 0.5%
Tel: 01534 512222
Ashburton’s Chindia equity fun is an Oeic that aims for growth by investing mainly in China and India. It will also contain multi-national companies in other countries that benefit from growth in China and India.
Looking the fund’s appeal to advisers and their clients, Hargreaves Lansdown senior analyst Meera Patel says: “This is a spicy offering giving exposure to two of the strongest growing regions in the world. There are many statistics and facts to show the impact these two countries are going to have on the rest of the world. For instance, these countries combined will be the second largest economic power in the next 15 years, by which time they will consume a quarter of the world’s energy. Unlike more developed countries, they also have favourable demographic trends with rising working populations,” she says.
Patel notes the growth dynamics are attractive and that this fund is likely to be a popular offering for many investors. “The risk appetites of private investors have also grown over the last three to four years and investors will find this an attractive proposition in itself,” she says.
While the main investments are in China and India, Patel likes the fund’s flexibility to invest in other markets where a significant proportion of growth in the underlying businesses are derived from China or India.
“There is an unconstrained investment approach, but the literature suggests that Ashburton is fully prepared to preserve value with an absolute return mindset. It will be interesting to see in what way they can preserve capital when markets are falling,” she says.
Switching her attention to the potential drawbacks Patel says: “While the story in favour of China and India is compelling, I could question the timing of this launch. The Chinese market had a superb year in 2006. India on the other hand has been a strong performing market for a few years and its market is now very expensive. I would question the amount of stock opportunities available in these countries compared to three years ago.”
She also finds the annual charge at 1.75 per cent fairly expensive. “We are seeing many specialist funds launching in the market with these higher charges, and provided the performance is exceptional I can accept the charge. It remains to be seen if Ashburton will generate the superior performance I am expecting,” she says.
Scanning the market for possible competitors Patel says: “This is the first fund of its kind but the following China and India funds could be seen as the main competition combined together – First State greater China, Jupiter China, Neptune China, First State Indian subcontinent and Fidelity India focus. The Allianz Bric stars fund would also be an obvious choice providing competition,” she says.
Patel also thinks it is worth pointing out that while emerging markets have performed well in recent years, growth may be less going forward and investors must have more realistic expectations of growth. She believes there may also be volatility ahead with corrections on their way and this must be taken into account.
“I would suggest that investors looking for exposure to emerging markets choose a more broadly based emerging markets fund that is diversified across several regions in the first instance. Then be worth considering more specialist funds like this if it fulfils their risk criteria.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average