Many happy returns from revamped F&C Emerging Market Fund

Six months on from a top to tail restructuring, the F&C Emerging Market Fund has seen a transformation in its performance.

It's fund manager Jeff Chowdhry, who heads up F&C's emerging equities desk, believes that the combination of a substantial team rebuild which commenced in 2006 and the introduction of a disciplined and highly focused structure to the fund are the two key factors behind the turn around in performance.

Chowdhry was appointed Head of Emerging Equities at F&C in January last year with a brief to rebuild F&C's longstanding emerging equities franchise. Since his appointment he has substantially strengthened the team with a number of key appointments including Gareth Morgan, who covers Russian and Eastern Europe, Latin American specialists Urban Larson and Martha Reyes, and Claire Franklin to focus on Eastern Europe Middle East Africa (EMEA). F&C now boasts 13 investment professionals focused on emerging equities and Asia ex Japan, one of the largest such resources in the City.

The F&C Emerging Markets Fund was revamped in December 2006 by Chowdhry who personally assumed the lead manager role on the fund. He ditched the fund's restrictive tracking error target and slashed the number of holdings to 35, each of which is approximately of an equal weighting. A new discipline has been applied whereby should a holding drift to more than 5% of the fund, it is trimmed back while positions that fall to 2% are either cut completely or topped back up. Under the new structure the various regional specialists in the team must pitch their best ideas to Chowdhry who selects stocks on their absolute potential and without reference to any country weighting or benchmark.

In the six months since the restructure the F&C Emerging Markets Fund has delivered a mouth-watering return of 21.52% compared to a sector average of 15.86%. Over this period the fund is ranked 3 / 29 in the sector, a transformational improvement on its previous record. The fund has grown from a tiny £9 million in December to over £28 million in six months

"Although this is a very small fund given the size of total emerging equities we manage at F&C, the transparency of a retail track record means that we view it very much as a shop window for what we are seeking to deliver across our emerging equities desk which is excellent performance over the long-term," explained Chowdhry.

"The team rebuild is complete now. I am very satisfied that we have the right people and idea flow is strong from all of our regional specialists. Only stocks rated 1 (high conviction) stand a chance of getting near this portfolio," said Chowdhry, "From my perspective the beauty of the structure of this fund is that every stock idea must fight for its place in the portfolio, so all 35 holdings are ideas that can make a serious contribution to performance. While the portfolio is concentrated, risk is managed through diversification of ideas. I want each holding to bring something different to the party," said Chowdhry.

Examples of stocks in the portfolio include Anhanguera Educational, a private education provider in Brazil, Media Prima Berhad, one of the largest media corporations in Malaysia and Orascom Construction Industries, a dominant supplier of cement in the Middle-East.