Join our community of smart investors

Advance Developing Markets celebrates again

FUND PROFILE: Advance Developing Markets outperformed in 2010 - and not for the first time
January 31, 2011

Advance Developing Markets is a fund of emerging markets investment trusts. It seeks to consistently beat S&P/IFCI Emerging Markets Composite Index by investing in a portfolio of funds that give diversified exposure to the world's emerging market economies.

498.5p

Concentrating on asset allocation and outsourcing stock picking has produced tremendous returns. Launched in June 1998, the fund has posted price performance of more than 400 per cent. Advance Developing Market Fund's net asset value (NAV) rose by 8.6 per cent in the final quarter of 2010, marginally ahead of the benchmark's 8.4 per cent. The fund's share price rose by 11.1 per cent, while the discount narrowed to 8.6 per cent at the end of the year. For 2010 as a whole, the fund outperformed the benchmark by 3.4 per cent.

Advance says this outperformance was largely a function of careful manager selection within the fund's top 10 holdings. Top performers included Atlantis China, JP Morgan Russian Securities and Tarpon All Equities, all of which benefited from a focus on domestic growth stories and a bias towards small- and mid-cap stocks. The fund benefited from a similar trend in many of its smaller holdings such as the India Capital Growth Fund, China Fund and BlackRock Latin American investment trust.

The fund is overweight Russia, Brazil, Turkey and frontier markets, while remaining 'light' on Taiwan, Korea and the smaller markets of Eastern Europe. The team at Advance, led by Slim Feriani, are cautiously optimistic for markets in 2011, but plan to navigate the portfolio away from areas were overheating is occurring to the 'safer' parts of the market with more attractive valuations.

While the fund's total expense ratio (TER) of 1.31 per cent is reasonable for a fund of funds in this space, there is a performance fee of 10 per cent based on a "high water mark" (the highest value that has been earned by an investment fund). This means that the manager will only receive performance fees if the fund's value is greater than its previous greatest value. Should the investment drop in value, the manager must bring it back above the previous greatest value before they can receive performance fees again.

ADVANCE DEVELOPING MARKETS FUND TRUST (ADMF)
PRICE498.5pNAV536.93p
SIZE OF FUND£390.931mPRICE DISCOUNT TO NAV-7.16
No OF SHARES (m):68.291 YEAR PRICE PERFORMANCE29.15%
SET UP DATE22-Jun-983 YEAR  PRICE PERFORMANCE17.85%
BETA0.955 YEAR PRICE PERFORMANCE13.70%
VOLATILITY13.6TOTAL EXPENSE RATIO1.31%*
TRACKING ERROR4.70%YIELD46%
SHARPE RATIO1.86GEARING100%
MORE DETAILSadvance-emering.com

Source: Advance Emerging Capital, Thomson Datastream, Morningstar*

Performance figures as at 28 January 2011.

Top ten holdings

HoldingPercentage
Atlantis China Fund7.4%
JP Morgan Russian Securities5.4%
BlackRock Latin American Investment Trust5.2%
Taiwan Fund Inc5.1%
Henderson TR Pacific Investment Trust4.9%
Aberdeen Latin America Equity 4%
Baring Emerging Europe Investment Trust3.9%
Tarpon all Equities Fund3.7%
Korea Fund inc3.7%
Coronation Top 20 Fund (Offshore) 3.4%

Geographic Breakdown

CountryPercentage
Brazil19.3%
China13.2%
Russia12.2%
Korea10.5%
Taiwan7.2%
India5.5%
Other28.4%
Cash3.7%