The wide disparity in the performance of Asian funds throughout 1999 can be explained by the rapid u...
The wide disparity in the performance of Asian funds throughout 1999 can be explained by the rapid upturn in the region and the big differences in country performance.
The best performance was achieved by those fund managers who pulled out of 1998's best bets - cash, Australia and Hong Kong - and into the most quickly recovering Asian markets.
Linda-Jane Coffin, director of Standard & Poor's Fund Services, said: "The substantial rebound in Asian markets during the fourth quarter of 1998 caught a number of funds by surprise and the high cash weightings were slow to be reinvested.
"It has typically been only those fund managers with the experience and the willingness to adopt a contrarian approach in making what appeared at the time to be a brave move to reinvest early in previous laggard markets, such as Korea, that have performed well. Cash and Australia, the two areas that many fund managers resorted to at the height of the crisis, have detracted from performance over the latest year under review as the 'tigers' tentatively regain their reputation."
The region as a whole did well over 1999, holding its own against increasing competition from Latin America and China. However, within the region, the difference in market performance was marked, with top performer Korea rising 208.1% in dollar terms while Taiwan managed just 20.3%.
Of the 39 funds reviewed by S&P Fund Research, 27 were managed from the region and 12 from either the UK or US. Hong Kong remains the dominant financial centre of the region, from which 20 of the funds covered were managed.
The debate over whether or not a fund is better managed locally remains inconclusive. Typically, however, it is the locally-based funds that are more likely to take significant bets against their benchmark.
However, funds run locally outperformed those that were not by 73.4% average return to 68.6%, a reversal of the 1998 result.
The increased volatility forced managers to be more active and, where turnover was measurable, it had increased.
Guy Boden, Asian analyst for Standard & Poor's, said: "Country and asset allocation were the prime drivers of performance for south-east Asia funds over the past year. Several managers interviewed now suggest that the easy money form the region's recovery has been made. They expect stock selection to play a more important role in outperformance over the next year."
Of the 39 funds Standard & Poor's Fund Research rated, five have AAA - Fidelity South East Asia, INVESCO GT Asia Enterprise, Schroder International Selection Fund Pacific Equity, Schroder Pacific Growth and Stewart Ivory Asia Pacific.
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