Top 100 Funds update: First State Global Emerging Markets Leaders to soft close

From 7 September 2013, it will impose a 4 per cent front-end charge on the fund in its UK range. This means that someone investing £1,000 in the fund will instantly lose £40 - a big deterrent to investment.

The Global Emerging Markets Leaders Fund in its Irish range will stop accepting further inflows from new investors altogether. Regular savers who maintain the level of their existing contributions in either fund will not be affected.

The decision follows significant inflows to the funds, which are managed by Jonathan Asante, head of global emerging markets and Glen Finegan, portfolio manager.

Over the past couple of years, the First State Global Emerging Market Leaders Fund (GB0033873919) has been very popular with investors and has grown rapidly - it is has now passed the £4bn mark. The "soft closure" is being put in place ahead of the fund "encountering any capacity issues that could affect the performance or restrict the team's ability to invest in certain companies".

The fund invests in shares of companies in emerging markets or whose business is predominantly based in emerging markets. This includes companies that are listed on exchanges in developed markets. The fund invests in shares of large- and mid-sized companies in the region. These companies generally have a stock market value of at least $1bn.

The fund's £4.053bn market capitalisation is spread across 70 holdings - meaning an average stake of £58m per company.

The decision is consistent with the approach that First State has taken since 2003 with funds facing similar issues. In 2003, First State closed the First State Global Emerging and Asia Pacific (All Cap) Funds to new investors. In 2012, First State closed the First State Asia Pacific Sustainability, First State Indian Subcontinent, First State Global Emerging Markets Sustainability, First State Greater China Growth, First State Latin America and First State Greater Hong Kong Growth Funds to new investors.

It also follows a similar move by Aberdeen, another leading emerging markets franchise, which implemented a 2 per cent initial charge in March this year on its £3.9bn Aberdeen Emerging Markets Fund (together with the Aberdeen Global Emerging Markets Equity and Aberdeen Global Emerging Markets Smaller Companies Funds) to discourage inflows, and is no longer marketing the funds.

So what should investors in the First State Global Emerging Market Leaders Fund do?

The soft-closure offers reassurance that First State is looking after existing investors' interests, while the timing of the announcement gives you ample time to consider your options.

While there is still an opportunity for new investors to get in before September, it may also be time to think about diversifying your emerging markets exposure into other funds. We have several other options in our Top 100 Funds, where for broad exposure to emerging markets we recommend four investment trusts:

Templeton Emerging Markets (TEM) - currently trading at a -9.53 per cent discount to its net asset value;

Utilico Emerging Markets (UEM), -5.31 per cent discount;

Advance Developing Markets Fund (ADMF), -10.13 per cent discount;

JPMorgan Global Emerging Markets Income Trust (JEMI), 0.73 per cent premium.

First State Global Emerging Markets Leaders Fund A Acc GBP

Annual performance history (cumulative % in GBP)

Source: First State & *MSCI Emerging Markets Index

Top 10 Holdings (as at 30 April 2013)

Country Breakdown (as at 30 April 2013)