Turn to Lazard for emerging markets growth

However, a good alternative after September, or emerging markets addition for investors who already hold the First State fund, has recently become available again. Lazard Emerging Markets Fund (GB00B24F1P65) soft-closed in November 2010 by imposing a 3.75 per cent initial charge. But since March this charge no longer applies to investors who buy the fund from an intermediary or platform such as Charles Stanley, Hargreaves Lansdown, Selftrade or TD Waterhouse.

This fund has beaten its benchmark, the MSCI Emerging Markets Index, over one, three and five years. It is also among the top 25 per cent of global emerging markets funds in terms of performance over three and five years.

The fund is smaller and more nimble than giant funds such as First State Global Emerging Markets Leaders - a reason why Rob Pemberton, investment director at wealth manager HFM Columbus, suggests it as an alternative (see more small alternatives to monster funds).

"Lazard Emerging Markets Fund has outperformed the MSCI EM Index since inception in 1997 and is managed by a well-resourced and experienced team," said Mr Pemberton. "It could be considered a safe pair of hands in a volatile, high-risk/high-reward sector. The investment team assess stocks against their global peers and look for companies with both inexpensive valuations and high levels of financial productivity. A more detailed analysis is then carried out and a varying discount applied against the main risks they associate with emerging markets investing. After this, the best ideas are selected with limits placed on overall country and sector exposure."

The fund invests in a broader geography than just the main emerging markets economies, Brazil, Russia, India and China, also offering exposure, for example, to Hungary, South Korea and South Africa.

That said, the team select shares for their individual merits rather than because of sector or geographic considerations. "In this headline-driven environment, we believe it is important to bear in mind that top-down factors are not a reliable gauge of stock prospects, especially in a region as diverse as the emerging markets," comment its investment team. "Our emerging markets equity platform spans multiple investment styles and market segments. Regardless of strategy, investment decisions are an expression of each team's fundamentally driven views; therefore our country and sector compositions will often differ from those of popular indices."

The fund has a reasonable ongoing charge of 1.61 per cent, very similar to the First State fund's 1.58 per cent, and cheaper than a number of its emerging markets sector peers.

Over one year the performance was not as strong with the fund on the borderline between the first and second quartile, while there have been wide variances in its calendar year returns. However, emerging markets equities are not short-term investments so short-term numbers and volatility should not make you worry too much as you should hold this kind of investment for at least five years. So, with strong long-term returns and highly experienced managers, this fund would make a good alternative or addition to your emerging markets allocation. Buy.

Source: Morningstar & *Lazard

Source: Morningstar as at 22 May 2013

Top 10 holdings as at 30 April 2013

Geographic breakdown