Rated Funds update: Asia and emerging market equity

Asia: Returning to favour

Asia Pacific has been the best-performing sector over the past six months. Asian markets have started to return to favour, as investors have begun looking for value outside the developed markets again now that the world economy is starting to recover.

Two of our fund and trust award winners were already on our Rated Funds list. However, there are two new additions.

Baillie Gifford Pacific was the winner of our best smaller fund award and Schroder Oriental Income was highly commended on the investment trust side.

Schroder Oriental Income, on the other hand, focuses on generating income.

Manager Matthew Dobbs says Asia is a good choice for income investors because it accounts for more than a third of the companies in the MSCI AC World index that yield more than 4%.

The product we are putting under review in this sector is Fidelity Asian Values investment trust. Although its one-year performance is still holding up, its shorter-term returns relative to its sector have been lagging.

It is a focused fund and more heavily exposed to Korea and China than most of its peer group.

Global emerging markets: Performance pick-up

Emerging markets had been going through a tough time, but their fortunes have started to pick up again recently.

All our Rated Funds in this category have made positive progress over the past six months and our top-performing fund, Templeton Emerging Markets investment trust, is up by nearly 10%.

Our annual awards have provided two new emerging markets selections. The newcomers are UBS Emerging Markets Equity Income and BlackRock Frontiers investment trust. UBS was the winner of our emerging markets smaller fund award.

Income generation is the principal focus of the fund, managed by Projit Chatterjee and Urs Antonioli, but the managers also aim to achieve some capital appreciation. Their main emphasis is on finding good-value stocks that pay high and/or increasing dividends.

BlackRock Frontiers won our emerging markets trust award. It is managed from London by a 10-strong team headed by Sam Vecht.

He argues that although individual frontier markets can be very volatile, when a range of them are held in a portfolio, this tends not to be the case, because there is such a low correlation between these markets.