Type: Offshore Oeic
Aim: Growth by investing in emerging markets through a range of assets including equities, equity-related securities, fixed income, currencies, money markets and cash, plus indirect commodity exposure through funds, exchange traded commodities, derivatives and the equity or debt of commodity companies
Minimum investment: Lump sum £2,500, euro 3,500, $5,000
Investment split: 100% in a multi-asset portfolio
Place of registration: Dublin
Charges: Initial up to 5%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 0845 082 2479
Baring Asset Management’s dynamic emerging markets fund is a multi-asset emerging markets fund.
Looking at the positive aspects of the fund, Chadney Bulgin partner Bruce Bulgin says: “The new fund invests in the emerging markets sector and is designed to achieve equity-like returns with less of the risk usually associated with emerging markets.
“Over a long time horizon it is likely that emerging markets will deliver higher returns than from the more mature markets, but with an increased risk of volatility, so the concept of potentially higher returns coupled with reduced risk is to be applauded.
Bulgin notes that Barings has both experience of emerging markets with a long established and wide range of both country specific and regional funds, as well as a successful strategy of multi-asset strategies.
“The underlying equity strategy is passive and returns are generated from the active asset allocation. There is a process whereby, with a top-down approach, Barings anticipates and responds to changing macro economic environments by changing the asset allocation. There is a 10-year strategy as Barings believes this has the best chance of delivering the target level of risk and return.”
Bulgin observes that Barings feels the degree of flexibility over asset classes is important, as during economic cycles different asset classes behave in different ways and by adopting this strategy, equity-like returns can be obtained from a lower risk portfolio.
“Managing a multi asset portfolio is all about managing risk. Barings aims to capture returns where available and to protect capital where necessary.Unlike many active funds all asset classes within the portfolio can go to zero allocation, so there is the ability to contain and manage risk within the portfolio. For instance, the maximum allocation for bonds is 80 per cent and for equities 70 per cent. Commodities can be up to 30 per cent and cash or near cash at up to 25 per cent.
Fund managers Percival Stanion and Toby Nangle have been with Barings for more than 10 years and are senior members of the Global Multi Asset Team at Barings. Bulgin says: “They are able to draw on the full investment resources of Barings, which comprises some 90 investment professionals.”
Turning to the potential drawbacks of the fund, Bulgin says: “As with any actively managed fund, the investor has a hope and expectation of obtaining superior returns. However, this may not prove to be the case and there is always the possibility of Barings’ team simply getting it wrong. In those circumstances the investor would have been better off investing in a range of sector funds and sticking to his or her own asset allocation strategy.”
Bulgin adds that there is also an adage that time in the market is more important than timing the market and that by opting for an asset allocation strategy and sticking to it will result in long term positive returns with volatility being in line with the asset allocation. “For example advisers who set their own asset allocations will find that with this fund the underlying asset allocation may well vary considerably from what they have set up,” he says.
Assessing the charges, Bulgin says: “Charges are in line with other active funds, but the initial charge at up to 5 per cent is on the high side. However many advisers will buy the fund through platforms. There are likely to be other costs owing to the amount of trading and it is not clear what the total expense ratio will be.
Bulgin observes that emerging market returns are likely to outperform those of the developed world and the growth rates for economies such as Brazil, China and India are way ahead of those from the ‘old world’.
“However, it may be a bumpy ride and to put matters in context, e merging markets in total account for less than 15 per cent of world stockmarket capitalisation against 40 per cent for the US alone.
“Having said that anyone who’s visited some of the great cities of Asia in particular will be aware that these are economic powerhouses. So long term it’s a great idea, short term this may not be the case.”
Bulgin adds that as long as the multi-asset strategy works, this should result in attractive returns with a lower level of risk. “his answers the dream of most investors which is simply to benefit from a high rate of return with minimal risk.”
Discussing potential competitors, Bulgin says: “At present there appear to be no comparable funds in the same sector, so the competition comes from other sector funds of which there are many, including some from Barings. First State, Allianz and Templeton are all well represented in this area as well as the global giants such as Fidelity.”
Summing up, Bulgin says: The fund is constructed from simple building blocks, and is very transparent. Anyone who looks at the factsheets will know immediately what is going on in the portfolio. Barings is not relying on financial engineering and complex investment structures. Simplicity is the key.
Suitability to market: Good
Investment strategy: Good