Looking to add an EM fund - a little confused

bertpalmer

I'm looking to add a global emerging markets fund to my long term portfolio. But I'm really stumped about how to choose the 'best one' for me.

Is it just a case of going to TrustNet, finding the best performer and taking in to account the risk profile, fee and aim?

http://www.trustnet.com/Investments/Perf.aspx?univ=O&Pf_Geoarea=GLOB&Pf_Sector=O:GLBLEMER&Pf_IncAcc=A&Pf_sortedColumn=P60M,UnitNameFull&Pf_sortedDirection=DESC

Is there there anything else I ought to be considering? I've noticed quite a few people mention the Vanguard global EM fund but it doesn't seem to be have done that well compared to others.

My investment aim is to make loads of money. I have a large VLS core and then a few sub funds such as small companies, EM, biotech and tech.

Thank you!

collingbone614

I like the directness of your thinking - "my investment aim is to make loads of money".

However I don't think it resolves the issue.. The VLS fund already has emerging markets in it. E.g. if you have the VLS 80, you have just shy of 6% emerging markets. Some would say this is fine, and the fund is broadly cap-weighted, and what edge is it that you have over the global financial markets. Others would make the case for a higher weighting, which would ask volatility, and excitement, I suppose.

You may need to consider why the amount of emerging market you already have is not enough. If it is not enough, did you know about this when you bought the Vanguard product? If it is more risk you are after, then you may pursue this by different means - such as by increasing the amount of equities you own, as opposed to fixed income. By swapping into an evening higher weighting, such as the VLS 100.

If you really wanted to add more emerging content in addition to what you already have in the VLS, you may want to consider frontier markets. This way, you are expanding into areas that aren't covered by the VLS. An example is the Advanced Frontier Markets Fund ETF. But, then you would be paying out active management charges, which is a different philosophy to your VLS choice. There is nothing wrong with that, but it is worth recognising.

InvestInPoker

bertpalmer wrote: »

I'm looking to add a global emerging markets fund to my long term portfolio. But I'm really stumped about how to choose the 'best one' for me.

I think global EM exposure via a single fund is a tough choice when it comes to the passive/active route. I had a similar decision to make recently and the criteria I thought about when looking at active funds were


1) Can't be a closet index tracker
2) Outperformance must be very likely due to skill rather than luck
3) Long history for the manager with the fund
4) Some sort of reassurance the manager isn't just going to jump ship and leave after a few years, want them in for the long haul.
5) Reasonable fees for all of the above that don't eat all of the outperformance up


Out of all of these once you get past number 1 then number 2 is by far and away the most important. Any manager can deviate from the market cap and then "run good" and outperform. The problem is being able to judge when it could just be luckboxing from when its genuine skill at picking the investments. You need a good timeframe of it happening to be sure - 10 years plus at least. Also a manager with good judgement who is making punchy bets away from the index (which you want from an active fund) could just be running bad if they underperform for a few years. Again timescale is necessary to judge.

Is it just a case of going to TrustNet, finding the best performer and taking in to account the risk profile, fee and aim?

It is a good place to start. Have to bear everything in mind. Just snap going for whatever has performed the best over the last few months would not be wise however in my opinion.

Is there there anything else I ought to be considering?

How about a few different active funds concentrating on specific EM countries rather than one global fund concentrating on them all?

I've noticed quite a few people mention the Vanguard global EM fund but it doesn't seem to be have done that well compared to others.

In the end I went for a passive global EM fund (I found a few active ones I really did like the look of but the fees were just a bit too high). Of course some active funds which are not closet index trackers will do better than the index return but will that continue above the fees for 20yrs+? That is something you have to judge yourself. I think it is a very close call.

My investment aim is to make loads of money

Borrowedtune

InvestInPoker wrote: »

In the end I went for a passive global EM fund

Just out of interest, did the First State Global EML fund enter into the figuring at all, or did the 4% upfront fee disqualify it from the longlist ?

InvestInPoker

Borrowedtune wrote: »

Just out of interest, did the First State Global EML fund enter into the figuring at all, or did the 4% upfront fee disqualify it from the longlist ?

I didn't look at it but it looks interesting at first glance, not that I am going to buy it now. Surely you can buy it without having to pay the 4% upfront? The 0.91% management fee looks fair enough

masonic

Borrowedtune wrote: »

Just out of interest, did the First State Global EML fund enter into the figuring at all, or did the 4% upfront fee disqualify it from the longlist ?

I used to hold it and was very happy with it. As an existing holder, I was able to continue adding to it for a while after it soft closed without paying the initial charge, but switched into other funds when that was no longer the case.

Borrowedtune

masonic wrote: »

I used to hold it and was very happy with it. As an existing holder, I was able to continue adding to it for a while after it soft closed without paying the initial charge, but switched into other funds when that was no longer the case.

Same here. I was still able to add to it after soft closure through a direct debit into an HL ISA, but I lost that right when I bailed out of HL in search of lower annual fees elsewhere.


It was a regret at the time, and it still is now.


Tangentially, there was a suggestion on Trustnet recently that FSAPML may be on the cusp of a soft-closure announcement: I hope it ain't true...

bertpalmer

Thanks for the responses - really appreciated.

I have VLS 100 - and although I know it contains some EM I was hoping to be a little more adventurous. A continuous refinement of my 'strategy' by adding a few extra satellite funds.

I'll sleep on it for a while perhaps.

Totton

Core & Satellite investing seems a good strategy to me, I would look to the Investment Trust world for this and consider the Terry Smith fund (FEET) and Templeton Emerging Mkts (TEM)

In a recent article I read that research indicated Templeton Emerging Markets (TEM) and Genesis Emerging Markets (GSS) where the leaders in terms of long-term performance. TEM was considered the better choice due to the wider discount so best to check that if considering an IT.

At the moment I don't hold an EM fund as I prefer Pacific Assets Trust (PAC) run by First State.

Recent thread on FEET at http://boards.fool.co.uk/terry-smith-feet-13179903.aspx?sort=whole

HTH,
Mickey

eagleeye

The emerging markets are highly volatile and takes longer time to get the good output as you have to weigh in market returns and currency exchange rates.
If you look at morningstar India and compare their large cap index tracker performance which is 15% for last 10years .If you add currency fluctuation then the performance is just 8 %.

collingbone614

eagleeye wrote: »

The emerging markets are highly volatile and takes longer time to get the good output as you have to weigh in market returns and currency exchange rates.
If you look at morningstar India and compare their large cap index tracker performance which is 15% for last 10years .If you add currency fluctuation then the performance is just 8 %.

To me this is an advantage of the VLS - since you can't see how the underlying funds are performing in your portfolio, you just keep buying it and "sticking to the plan". You don't look at your portfolio and go off on a performance-chasing rampage and sell stuff just because it has been down for a few weeks or months. From this perspective it defends against irrational meddling and actions which go against your own best-interests. It helps tame the lizard brain.