This article is part of the Morningstar's Guide to Emerging Market Investing. Click here to find out just what an emerging market is and which hold the potential to grow exponentially - boosting your investment portfolio.
Looking for a highly-rated fund that offers exposure to Asian equities? We used the Morningstar Fund Screener to identify those in the sector that have been awarded Gold, Silver or Bronze by Morningstar analysts.
Aberdeen Asia Pacific Equity
This is among the best choices for Asian equity exposure, says Morningstar analyst Amaya Assan. The Gold Rated fund is managed by a well-resourced and experienced management team based in Singapore.
The chief attraction continues to be the investment process, which has been in place since 1985 and reflects the team's strong emphasis on quality, growing firms that have the management skill to deal with that growth. They consider quality companies to have sustainable, competitive business models, strong balance sheets, high returns on assets and capital, and good corporate governance.
Active risks can be high in the fund and, combined with the focus on quality and long-term investing, the fund's performance can look very different from its benchmark and peers.
BlackRock Pacific Ex Japan Equity Tracker
This Bronze Rated fund offers equity exposure to developed equity markets in the Pacific/Asia region, with a strong bias toward Australia, while excluding Japanese equities. Australia represents more than a third of the portfolio’s value.
The fund tracks the FTSE World Asia Pacific ex Japan TR GBP Index, investing in all index constituents. Despite the inclusion of 500-plus stocks, the fund's exposure to mid-cap stocks is rather small, representing 9% of the portfolio. At the sector level, the fund is overweight in basic materials, financial services, and IT, while it is underweight real estate, communication services, and consumer cyclical relative to the category average.
First State Asia Pacific
This Gold Rated fund remains an impressive offering in the sector. Morningstar analysts continue to watch First State’s huge book of assets closely, with the majority of their Asia and emerging markets strategies soft-closed to new investors or near to it. This all-cap fund is closed to new business although its large-cap orientated cousin, Asia Pacific Leaders, remained open at the writing of this report. Analysts think First State can cope for now, but if assets continue to grow strongly, they would be concerned.
The team behind this fund is excellent. The process focuses on sustainable long-term earnings growth, and the managers typically own businesses for a long time, demanding less liquidity than those who run higher-turnover strategies.
