This article is part of Morningstar's Guide to Financial Education
Macroeconomic fundamentals have been behind the rally of some of the best performing stock markets this year – India for example has been buoyed by the election of Prime Minister Narendra Modi. His meaningful reforms may continue to support stock market returns. As a result, funds exposed to the region make up the bulk of the best performers so far this year – through both single country funds and Asian equities trusts.
But experienced investors know past performance is not an indication of future returns – however a Gold, Silver or Bronze Morningstar Analyst Rating is.
“Analyst ratings are levels of conviction in a fund's ability to outperform over the long term,” said Jackie Beard director of closed-end fund research.
“So we're not suggesting that a Silver-Rated fund should be bought today. We're saying if that's the type of fund you are looking for, we think it's one of the best. And the different layers of ratings are very much an expression of our conviction.”
Using the Morningstar Fund Screener and Closed-End Fund Screener we have identified the best performing funds of 2014, and then filtered out those that analysts do not have conviction in. As a result here are the highest rated, best performing funds of 2014.
JPMorgan Indian (JII)
Return YTD: 39%
This Bronze Rated trust is managed by an experienced duo in Rukhshad Shroff and Rajendra Nair. Shroff, who was appointed in 2003, brings two decades of expertise. Although the head count is small, the team’s focus on large-cap companies, combined with their low-turnover approach, mitigates concerns about their workload. The fund features a strong management supported by a close-knit team and a tried-and-tested process.
First State Indian Subcontinent
Return YTD: 34.6%
This Bronze Rated fund applies its tried-and-tested process here, seeking companies with quality management and sustainable drivers of earnings growth, that are trading on attractive valuations. In Jan 2012, this fund and its Irish-domiciled vehicle were soft-closed to new investors. The solid investment approach and high-calibre staff who adhere to First State Stewart’s process give the fund a good chance of maintaining its strong track record.
Jupiter India
Return YTD: 33%
This Bronze Rated fund is an attractive way to gain Indian equity exposure, although a significant exposure to smaller companies makes it a riskier option. Despite a poor showing in 2013, driven by the fund's exposure to smaller-cap stocks that struggled relative to their larger-cap counterparts, the fund’s long-term track record remains strong.
Aberdeen New Thai (ANW)
Return YTD: 30.6%
With a remit to invest solely in the Thai equity market, which itself is fraught with different sources of risk, most investors are likely to prefer a broader Asian equity fund that can freely allocate into and away from the country. However, for those seeking dedicated Thai exposure, Morningstar Analysts think this Bronze Rated trust is a credible choice.
Invesco Asia Trust (IAT)
Return YTD: 24%
This Bronze Rated trust has comfortably outperformed its peers over the past decade, although it isn't always the smoothest of rides for shareholders. But the management team isn't afraid to have conviction against the tide in the belief that over the longer term those ideas will come good. The managers use gearing actively at this fund and flex it according to their view on current valuations.
