DEVELOPED ASIA PACIFIC FUND
Aim: Growth by investing in medium to large cap companies in Australia, New Zealand, Singapore and Hong Kong.
Minimum investment: Lump sum £1,000, monthly £50.
Investment split: Australia 48 per cent, New Zealand 1.5 per cent, Hong Kong 42.5 per cent, Singapore 5.5 per cent, cash 2.5 per cent.
Isa link: No.
Pep transfers: No.
Charges: Initial 5 per cent, annual 1.25 per cent.
Commission: Initial 3 per cent, renewal 0.5 per cent.
Tel: 0800 9174752.
Suitability to market: 6.4
Investment strategy: 6.7
Past performance: 7.0
Company's reputation: 7.4
Product literature: 5.5
The panel: Lesley Thomas, Investment consultant, Dawn Slater Associates, Michael Roach, Director, Hargreaves Lansdown,
Martin Dilke-Wing, Director, Morgans Independent Advisers.
The Baillie Gifford developed Asia Pacific fund is an Oeic that aims to produce capital growth by investing in Australia, Hong Kong, New Zealand and Singapore.
Examining how the fund fits into the market, Thomas says: “The fund has discovered a new niche. It will invest only in Hong Kong, Australia, New Zealand and Singapore. These markets have different strengths from each other and this offers the managers an extra opportunity for outperformance.”
Dilke-Wing says: “Baillie Gifford is a respected manager in the context of Far Eastern fund management, running a substantial and relatively successful institutional fund. The launch of this fund strikes me as an attempt to get funds under management out of a flat market and in this, it appears to have succeeded in the short term.” Roach says: “It fits in with more aggressive Far Eastern funds such as the Lloyd George eastern opportunities fund.”
Identifying the potential client base for the fund, Dilke-Wing says: “The fund is suitable for experienced investors looking for exposure to the Far East excluding Japan, or perhaps looking to replicate sector under performing managers.” Roach suggests: “Anyone looking for Asian exposure from one of the best teams around, but without the smaller more volatile countries.” Thomas points to clients who like high risk and who expect the Far East to respond very positively to an upturn in the US. She also mentions those who have a particular interest in one or more local economies and do not like being invested in emerging markets.
Looking at the marketing opportunities the fund could provide, Roach says: “Not a great deal because most clients are not interested in this sort of fund at the current time. perversely, this will probably be one of the best performing areas in the coming couple of weeks.” Thomas says: “Once the US is seen to be through the worst, interest in the Far East will quicken. Baillie Gifford may well have launched a fund ahead of performance.” Dilke-Wing says: “The fund is too niche to provide any marketing opportunities to Morgans' current base.”
Discussing the strengths of the fund, Thomas says: “It offers the opportunity to invest in the Far East without taking on the worst risks attaching to the emerging markets of the region. A savings plan from £50 per month is also available.” Dilke-Wing says: “The main useful features for the product are the reputation of Baillie Gifford in this sector. If you have clients that want concentrated exposure to a small selection of stocks and markets, it could be useful.” Roach thinks it provides a very different asset allocation to other Far Eastern funds. He adds that it could be slightly less volatile than other Far Eastern funds.
Analysing the fund's investment strategy, Dilke-Wing says: “In common with 95 per cent of other IFAs, I do not see how I can be expected to know whether Hong Kong, Australia, New Zealand and Singapore will outperform Taiwan, Malaysia, China and Korea. For this reason, if I was going to recommend Asia excluding Japan, I might want a wider spread.”
Thomas says: “The fund managers have a great deal of discretion. They don't expect to go out on a limb against benchmark weightings but they could. They can invest across the market capitalisation range. The number of holdings likely to increase from the current 50 they intend to move from larger to mid-cap companies in Australia shortly.” Roach says: “It seems to be fairly defensive at the current time as over 45 per cent of the fund is invested in Australia and just under 39 per cent in Hong Kong.”
Assessing the drawbacks of the fund, Roach says: “It has a more inflexible asset allocation, therefore the trust needs to be put together within an overall portfolio. For those clients seeking Far East exposure within one trust, this is probably not the fund since its asset allocation is too limited. The fund needs to be looked at in the context of a bigger portfolio.”
Thomas says: “The fund is highly specific, being invested in only four markets of which three are relatively minor markets. It is not really a Far East fund as it could miss out on the biggest stories there.” Dilke-Wing says: “The disadvantages are that it is narrow in terms of markets and stock holdings and is being launched at a flat market.”
The panel turn to Baillie Gifford's reputation. Roach says: “To a lot of IFAs, Baillie Gifford is an unknown quantity. However, it has one of the best energy markets and Far Eastern fund management teams around.” Thomas agrees. She thinks its reputation is low-key among IFAs as it has not marketed itself in the IFA direction. However, she adds that the company is helpful towards IFAs. Dilke-Wing believes Baillie Gifford has a solid reputation, particularly in Japan and the Far East.
Moving to the company's past performance, Thomas says: “It has a good record, although loss of key figures on the strategy side over the last two years may make a difference. It is probably better known among IFAs for its Japan funds.” Roach thinks past performance in this area is very good.
Weighing up the competition the fund is likely to face, Dilke-Wing says: “The established funds in the sector such as Fidelity, Henderson, Invesco Perpetual and Schroder will provide most competition.” Roach feels the fund is unique and is unaware of any other fund that invests in the same areas. Thomas says: “I am not aware of other funds investing in this particular universe. Competition would be from other focussed and narrow range funds, including some in the Far East.”
Looking at the charges, Thomas says: “Generally they are reasonable for investments in this geographic region. The dilution levy in the event of the fund's continued decline could be an open-ended liability.” Roach feels the 1.25 per cent annual management charge seems very reasonable for this sort of fund and Dilke-Wing thinks the charges are standard.
Thomas thinks the commission is standard. Roach and Dilke-Wing agree. The panel then consider the product literature. Roach says: “There is not a great deal of literature. However, having spoken to Baillie Gifford, this is deliberate. It hasn't wanted to widely market this.” Thomas says: “The key features offer the relevant information.”
Summing up, Dilke-Wing says: “I do not entirely understand the reason for launching this fund at this time except as a means of extracting diverted funds from other managers.” Roach concludes: “Baille Gifford is one of the only companies to treat emerging markets seriously. As this will be run by this team, it has the potential to be a good fund.”