Type: Offshore Oeic
Aim: Growth by investing in companies in Europe, the Middle East and Africa
Minimum investment: Lump sum £1,000
Investment split: 48% South Africa, 27% Russia, 4% Canada, 3% Turkey, 3% UK, 2% Israel, 2% Egypt, 2% Australia, 2% Czech Republic, 1% Kazakhstan, 1% Romania, 1% US, 4% other
Place of registration: Luxemburg
Charges: Initial 3.5%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 0800 4141
Fidelity International has introduced a Luxemburg-based fund investing in Emerging Europe, the Middle East and Africa. It will comprise a concentrated portfolio of 50-70 stocks across more than 13 countries.
Looking at the market context of this fund Hargreaves Lansdown senior analyst Meera Patel says: “The EMEA region offers exposure to some of the untapped investment opportunities in the world. The region is rich in resources with more than 80 per cent of the world’s proven oil reserves. It also has favourable demographics with a young and rapidly growing population. The impact of urbanisation and the strong demand for resources from China and India means that the EMEA region will be a direct beneficiary of these trends.”
Patel believes the fund offers diversification benefits from other global emerging markets and is lowly correlated to the US, Europe and the UK. “It could therefore make up a small proportion of an investors portfolio once core funds are in place and consideration has been given to broader global emerging market funds,” she says.
While the fund is benchmarked to the MSCI Emerging EMEA Index, Patel observes that it is not restricted to the index, country or sectors. “For example, the index is currently made up of 217 companies, but the manager’s universe of stocks extends beyond 2000 so there may be investments in other countries outside of the benchmark if there are attractive opportunities available,” she says.
The manager, Nick Price is a contrarian investor and will buy unloved stocks that have been ignored by the market but where there is scope for growth over two years or more. Patel says: “His investment approach, together with Fidelity’s wealth of resources, should offer superior long term growth returns for investors, but I emphasise a period of 10 years or more is the time horizon investors must have in mind when investing in this specialist area.”
One thing Patel thinks is worth noting is the annual management charge. “Nowadays, the annual management charge on specialist products tends to be in the region of 1.75 per cent. This fund charges a competitive 1.5 per cent but at the end of the day, charges should come secondary to the underlying investment strategy and prospects for growth,” she says.
Looking at the potential drawbacks of the fund Patel says: “There is little I don’t like about this fund. However, as with any speculative investment, investors must take into account the risks associated. Aside from the economic risk, I believe the main risk to the region is political risk.
“While I appreciate political risk has come down in many countries, it cannot be ruled out completely, particularly in some of the volatile areas of the Middle East for instance. Having said this, the manager will be looking to invest in the more politically and economically sound regions and companies.”
Patel also highlights the issue of performance. “Being a new product, the track record is limited and whilst the overall concept and story in favour of this region is compelling, the manager needs to build a decent track record and the fund’s success will be a function of its performance in the early days.”
Scanning the market for possible competitors Patel concludes: “As far as I’m aware, JPMorgan has an offshore emerging Europe, Middle East and Africa fund and this would be the main competition.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average