Tap top growth with Aberdeen Emerging Markets

Soft closing means the fund is not promoted by the company or brokers who stop offering discounts on certain charges to limit new money flows, usually because the asset managers feel it is becoming too large. But it does not mean the fund is totally shut to new investment, and in some cases - for example, Aberdeen Emerging Markets - discounts such as waiving of the initial charge can still be obtained from certain fund platforms, namely Hargreaves Lansdown, Alliance Trust Savings and Chelsea Financial Services.

Aberdeen Emerging Markets is certainly worth noticing, being among the top-five performing funds in the Global Emerging Markets sector over three and five years, and first quartile over one, as well as beating its benchmark by considerable margins over those periods.

The fund is run by Aberdeen's emerging markets team, considered to be one of the best in the industry alongside First State. They follow the Aberdeen investment process which has proved successful with a number of funds, and key aspects of which include:

■ focus on long-term investments;

■ first-hand research from regional teams; and

■ no investment without interviewing a company's management

The investment team seeks good quality shares with strong management and business models, which are attractively-priced. Benchmarks are not a big influence on portfolio construction as Aberdeen doesn't think they really indicate future performance, though the investment team mitigates risk with diversification at share level. They also mitigate risk by avoiding businesses they don't understand and which have discriminatory shareholder structures.

A global emerging markets approach is a better option for investors with smaller portfolios and those without a very high-risk appetite. There are also merits to a global approach just now even for those who could consider regional or country funds because of general uncertainty about where economies and markets are headed, as well as mixed views over major regions such as China. "While China looks cheap, investors are still shunning it at the moment, so it may get cheaper still," says Adrian Lowcock, senior investment manager at broker Hargreaves Lansdown. "We like the valuations for China, but there is little choice for pure China funds and we prefer to offer a diversified approach to investing."

Aberdeen Emerging Markets is well-diversified geographically with around 16 per cent in China/Hong Kong, a similar amount in Brazil and a significant spread over many non-BRIC (Brazil, Russia, India, China) markets (see below).

The downside includes the fund size of £3.5bn, which could mean it may be less flexible, and not able to invest in some smaller shares. But there are a number of successful funds that are similarly large, prominent examples being Neil Woodford's Invesco Perpetual Income and High Income funds. (Read Too big to be a winner?)

Aberdeen Emerging Markets does have a relatively high total expense ratio (TER) of 1.93 per cent (the average open-ended fund charges around 1.6 per cent). But in view of the strong consistent performance, this is a much better option than a poorly performing fund that's a few basis points cheaper, and it is still under 2 per cent. Aberdeen doesn't offer a cheaper investment trust equivalent, so if you want to tap into Aberdeen emerging markets growth expertise, this is what you have to buy.

Source: Morningstar, *Aberdeen.

Source: Morningstar as at 7 December 2012

Top 10 holdings as at 31 October 2012

Geographic breakdown