Overseas higher risk

The higher risk funds are either emerging markets, or commodities, or sub-sectors such as Japanese smaller companies.

We have called M&G Global Basics the thinking-persons way to access the positive trends emanating from emerging markets, without taking on the full blown risks of an emerging market or commodities fund. It is up 13% since the turn of the year, compared to the MSCI World Index, down 2.1%. Don’t expect it to be immune from global turbulence, but as a very diversified fund that has consistently outperformed, it is an outstanding long term holding.

Our favourite for a more direct emerging markets holding has been Axa Framlington Emerging Markets. Down 2.6% to date this year, and it has under-performed the index by 1%, not a margin that worries us over such a short period. There remains little or nothing to choose between this and other large global funds (which we would contrast with the more specialist and focussed funds that sit within the emerging markets sector).

Our focussed China selection has been the long-standing Invesco Perpetual Hong Kong and China. You will have seen the headlines that the Chinese stock market is down 50% from its peak, though the index being referred to is one primarily used by locals, and falls for overseas investors have been lower. Our fund choice is down (only!) 15.9% this year. It was down much more in mid-March (about 30%) and has recovered strongly from this trough - such is the volatility that you should expect with these more focussed funds.

We have reviewed the JPM Natural Resources and Investec Global Energy funds earlier, in section 4.2. No changes needed.

It is more important to have a spread in this higher risk selection than in any other part of the portfolio. Elsewhere in this edition we have identified one high risk fund that is showing remarkable lack of volatility (at least to date), and another with huge potential which is at a low ebb (though could yet go lower). These are the New Star Africa funds (section 4.4) and Jupiter India (section 4.5).

Africa has particular attractions because of the apparent total lack of correlation with other emerging markets and the rest of the world. Even within Africa, there can be civil unrest and turmoil in one country, while its neighbours enjoy stability and a steady-as-she-goes stockmarket.

With regard to India we would simply warn that there could be somewhat more volatility in the short term, as the unpredictable mix of politics and economics frays stock market nerves.

Co and Fund	Rating	Risk
M&G Global Basics	Platinum	7.8	About	Buy
AXA Framlington Emerging Mkts	Silver	9.9	About	Buy
JPM Natural Resources	Silver	12.6	About	Buy
Investec Global Energy	Silver	12.3	About	Buy
Jupiter India	N/A	N/A	About	Buy
New Star Heart of Africa	N/A	N/A	About	Buy

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