Product of the month - The Templeton Emerging Markets Smaller Companies Fund
Franklin Templeton has opened its Luxembourg-registered Templeton Emerging Markets Smaller Companies Fund to UK investors, with a sterling-denominated share class.

This SICAV aims to deliver long-term capital growth by investing mainly in smaller companies – those with a market cap of $1 billion (£510,000) or less at the time of purchase – located in emerging markets, or companies that derive significant revenue
or profits from emerging market countries.

The fund is managed by Mark Mobius who has over 30 years’ experience managing emerging market portfolios. Franklin Templeton believes this fund is well positioned
to tap into undiscovered small-cap investment opportunities using its proven investment process, which draws heavily on proprietary company research.
While the universe of emerging markets listed companies with a market
cap of US$1 billion or below has grown to about 17,000 companies, the team has found the asset class to be largely unexplored and many companies to be mispriced
by the wider market.

Minimum initial investment: US$5,000 or GBP equivalent
Initial charge: Five per cent
Annual management charge: 2.1 per cent
Contact: Call 0800 305 306
or visit the website www.franklintempleton.co.uk

Philip Johnson says:
Mark Mobius will be supported by 34 dedicated emerging market investment professionals based in 13 worldwide offices. Together they visit over 1,500 companies every year and maintain an extensive research database.

The Global Emerging Markets sector has produced good results over the past few years. Investing in undervalued companies with the potential to increase in value over the long term should be an attractive investment proposition. The emerging market small-cap asset class is providing exciting investment opportunities from established emerging markets as well as including those in less-developed markets such
as Vietnam, Kazakhstan and Ukraine.

With this fund there is the potential to invest in small-cap companies in all emerging market regions: Eastern Europe, Africa, Central and South America and Asia Pacific. Many of those emerging markets have robust GDP growth, trade surpluses, high foreign reserves, low inflation, strong investment and domestic demand – an environment in which well-run small-cap companies can flourish. 

This is an opportunity to access exciting companies at the earliest stages of their development. With the continued growth in emerging markets, some may even grow to be tomorrow’s large-caps. 

Emerging market small-cap companies can offer high growth potential, making this fund an interesting option for investors who understand
and are comfortable with the higher-risk nature of this asset class and are prepared to invest for the longer term. 4 stars

Neptune Latin America Fund
The objective of the Neptune Latin America Fund is to generate capital growth
from investment, predominantly in Latin American securities or in securities issued by companies transacting a significant proportion of business in Latin America.
Managed by Felix Wintle, head of US equities and manager of the Neptune US Opportunities Fund, the Neptune Latin America Fund will provide investors with exposure to a wealth of opportunities across the region.

Wintle believes Latin America has become a global economy focal point and demand will stay strong for many years. ‘Brazil has the world’s largest mining company, Chile has the largest copper mine and companies throughout the region have been benefiting from the boom in commodity prices evident over the past three years,’ he points out.

Neptune expects to see this boom continue and is confident that companies can capitalise on the opportunities that will present themselves over
the coming years.

Minimum initial investment: £1,000 (£50 a month regular)
Initial charge: 5.0 per cent
Annual management charge: 1.75 per cent
Contact: 0800 587 5051 or visit www.neptune-im.co.uk

James Davies says:
Despite having a reputation for financial instability and political volatility, Latin America has experienced strong economic growth in recent years. This is partially because the aforementioned problems have been far less prevalent since 2000. The FTSE Brazil Index, for example, rose by over 500 per cent in the five years up to the end of 2007.
Felix Wintle will use Neptune’s global thematic view in conjunction with his own stock selection abilities – which have served him admirably on the US Opportunities Fund. 
Having previously lived in Chile, Wintle sees Latin American markets as being significant beneficiaries of the global demand for commodities – demand that has seen the price of hard and soft commodities soar in recent years. 
However, the region is not simply a play on
the commodities story. Wintle cites a burgeoning middle class across the continent who are leading a demand for consumer and financial products and services – so much so that, at present, the largest sector is financials, with Brazil being the country
of choice.

Brazil is likely to feature heavily in the fund and exposure is mainly gained through stocks quoted directly on the Brazilian stock market. However, Wintle is gaining exposure to other countries, principally through American Depositary Receipts (ADR). ADRs are an established and reliable way for non-US companies to trade on US exchanges. Sensibly, Wintle is wary of some areas of Latin America such as Venezuela and Bolivia, where the recent record of government has been less favourable towards the assets and enterprise of private companies. Being unconstrained in terms of country allocation means that Wintle is able to have a zero weighting to these two difficult countries.

It is perhaps a little surprising that Latin America is so poorly represented when it comes to fund choice for the UK investor. True, a handful of established funds are available, but it is about time that the availability of funds was improved. Neptune is building a reputation for having a good fund in just about every geographic region and, like Latin America, it is acquiring a track record for stability.

I like this fund and think that it provides significant potential for investors looking to diversify their emerging market exposure, or an alternative way to benefit from commodity price increases. 4 stars

Aberdeen Global – Responsible World Equity Fund
This new sub-fund of Aberdeen Global, the group’s Luxembourg-based SICAV, has been launched in response to increasing demand for socially responsible investing (SRI) and is the third fund in Aberdeen’s range to incorporate SRI strategies.
The fund will seek long-term return by investing primarily in an internationally diversified portfolio of equities, selected using Aberdeen’s successful global equity investment process.
The team will screen companies for involvement in gambling, military, weapons and the production and/or sale of alcohol, tobacco or pornographic products. If a company’s turnover in any of these areas exceeds ten per cent – or five per cent for pornography – it will automatically be excluded from the fund’s investment universe.
They will also use an ethical engagement overlay in three areas: corporate governance, the environment and labour/human rights, actively working to monitor the conduct of portfolio companies and engage with their management to seek high levels of performance.

Minimum initial investment: US$1,500
Initial charge: 4.25 per cent
Annual management charge: 1.5 per cent
Contact: Visit the website www.aberdeen-asset.com

Robin Amlôt says:
Aberdeen Asset Managers (AAM) has form in this area. In 1999, the firm launched the Ethical World Fund and in 2006 the Ethical Engagement UK Fund. Responsible World Equity is, therefore, the third fund in the group’s SRI range.
It aims to offer an internationally diversified portfolio. It invests mainly in financials (23.7 per cent), health care (12.9 per cent), IT (12.4 per cent) and industrials (11.2 per cent)
Day-to-day management is being handled by Jamie Cummings, while Stephen Docherty, AAM’s head of global equities, is leading a team of 11.

In January 2007, the CIS Sustainable Leaders Trust became the first ‘green’ fund to top the IMA UK All Companies sector on one-year performance. This was remarkable as we tend to expect ethical funds to underperform because investments are being chosen on criteria other than those aimed at maximising investment return.
AAM has cracked this problem by creating a global shortlist of around 300 potential investments based on fundamentals such as corporate quality and value, then adding the SRI overlay.

Jamie Cummings reckons this bottom-up approach is investors’ best surety
of decent returns – fundamental stockpicking taking a prime role in the construction of the portfolio.

There are problems, however. The fund is not offered in sterling-denominated shares.
Two share classes, dollar and euro, are currently available and the outlook for the pound against both of them is problematic. Until a sterling share class is available, currency issues could multiply the return needed in order to do more than break even after fees.Also, you do not have direct access to the fund yet – it is being marketed primarily to institutional, fund of funds and private bank investment managers. Check if your existing investment manager will be in a position to offer it to you, or find one who can. 3 stars

Henderson Horizon Global Financials Fund
With a focused and balanced portfolio of 20 to 40 stocks, this is the latest addition to Henderson Global Investors’ Luxembourg SICAV Horizon range, following
its successful property equities, technology and smaller companies funds.
The fund manager of this sophisticated UCITS III fund is Martin Kinsler, who has eight years’ experience as a financials analyst and fund manager. He is supported by Vincent Martinez, previously a financials analyst for Henderson’s credit team.
According to Henderson, there is increasing demand for sector specialist funds
as multi-managers and private client managers look to manage their own asset allocation.

Despite the continuing pressure of the sub-prime collapse, Kinsler believes there are still many financials that are extremely healthy, with sound balance sheets and exceptionally strong cash generation, which provide excellent capital and income opportunities.

Minimum initial investment: £2,500
Initial charge: Up to five per cent
Annual management charge: 1.2 per cent (plus performance fee)
Contact: Visit the website www.henderson.com

Andrew Wilson says:
It is unusual for an investment company to launch a fund after the sector has had a period of poor performance. The usual trick is to launch ‘flavour of the month’ funds after strong performance and try to capitalise on the feel-good factor.

Henderson will be aware that there is a significant potential market for financial funds, demonstrated by the popularity of those of New Star and Jupiter. If it manages to time its launch accurately, the performance of its fund could stand up comparatively well against its competitors, who will have suffered bad times lately. It is also possible that the ‘credit crunch’ has not yet been fully played out and that more bad times are ahead.
Kate O’Neill, European Distribution Director at Henderson, argues that ‘Specialist funds are better able to capture investment opportunities than a mainstream portfolio due to the specialist nature of the team, who have the time and resources to gain more industry understanding from being closer to the companies.’ This might be understandable in some specialist sectors, but Financials make up 20 to 30 per cent of most markets so the majority of fund managers have dedicated resource in this area.
Buying a specialist financials fund increases investors’ exposure to, and dependence on, financials, so increasing the overall risk profile of a client’s portfolio.

While the fund allows low investment amounts, it will appeal more to sophisticated investors, prepared to take larger sector bets. 2 stars