Offshore emerging market funds top of performance tables

UK-domiciled emerging market funds are facing tough competition from offshore counterparts following their inclusion in the performance league tables from the first quarter of this year, as predicted by HSBC Global Asset Management and Baring Asset Management in December 2009.

An analysis of Lipper performance data by HSBC Global Asset Management and Baring Asset Management shows that over the past three years (ending August 2010), at least eight of the top ten funds specialising in a particular major emerging market, are domiciled offshore.

For example, amid China equity funds, the top ten best performing are domiciled in either Ireland or Luxembourg, rather than the UK.

Among Russia funds, eight of the best ten performers are domiciled outside the UK. Similarly, eight of the top ten best performing Indian equity funds over three years are domiciled offshore. 

There are only nine Brazilian equity funds with a three-year track record, of which all are domiciled outside the UK.

Andy Clark, Managing Director, HSBC Global Asset Management (UK), said: "Until recently offshore funds missed the radar screens of investors and intermediaries who relied heavily on the IMA sector driven performance league tables.   Now, these better performing funds are clearly visible amid the popular databases. This has levelled the playing field and as a result, investors seeking emerging market funds have more good quality choice."

Rod Aldridge, Head of UK Retail Distribution at Baring Asset Management added: "Historically there was often a misconception amongst intermediaries that investing in offshore funds was less efficient from a tax, fee or regulatory point of view. The reality is that offshore products not only offer, in many cases, better performance than their onshore peers but are also competitive when it comes to all these other issues."

Clark called for investment fund platforms - many of which had traditionally resisted including offshore funds - to be more accommodating. Although platforms had made progress in recent years, Clark said there was further work to be done in ensuring investors have access to the proven best funds,  irrespective of where they are domiciled.

HSBC Global Asset Management has registered 11 funds for inclusion in the IMA sectors, of which 10 are emerging market-themed funds. HSBC is a major provider of emerging markets asset management solutions with USD93bn invested in this asset class (to end of June 2010). These include the HSBC GIF Indian Equity fund and HSBC GIF Brazil Equity Fund, both of which are among the top performing funds in their respective categories over three years (according to Lipper to end August 2010 in GBP, bid to bid). Clark said the funds had received increased interest since becoming more visible to UK investors and intermediaries via major performance databases.

Barings are pioneers in Emerging Markets and have a long-standing commitment to this asset class. With $20.2bn invested in emerging markets assets, this accounts for 42% of total assets under management as at 31 July 2010. Barings now has 10 offshore funds listed in the IMA sectors, of which eight have an emerging markets focus. This includes the Baring Global Emerging Markets Fund, a top performer relative to its Lipper sector over three years to 31 August 2010 and the newly launched Baring MENA Fund.