Niche pioneer still mines new seams

Last month Baring Asset Management launched the latest of its niche funds – a mining portfolio. Will this be eclipsed in a “me too” rush as some Barings funds have been? By Shaun Cumming.

Baring Asset Management is known for launching unusual funds that focus on niche investment areas, such as a single country or even a single asset class. The latest of these, the Baring Mining fund, was launched last month. Similar launches have included Baring Australia, Baring German Growth, and Baring Korea Trust.

Rod Aldridge, the head of UK distribution at Barings, says the firm sees itself as pioneering when it comes to finding new or underinvested areas to launch funds in. The key, however, is that its management has strong views on the growth prospects found in these areas.

He says: “With the funds we have launched over the last few years, it is because we have a view on the investment case. If you believe in an investment case you can launch a fund and then wait for the investors to come. Looking at our Hong Kong China fund, it was small for a long time because people didn’t want to invest in China back then. But that changed.

“We are very much pioneers. A big part of what we do is emerging markets and we spend a lot of time talking the emerging markets story.” (Focus continues below)

Commentators say Barings is indeed a firm that breaks new ground in finding areas for investment. However, this does not stop competitors appearing from behind, sometimes with better results and stealing some of the attention.

Tim Cockerill, the head of collectives research at Rowan Dartington, says: “I do not think there is another group which could claim to be as pioneering as Barings has been. But there needs to be a following through of this initial work.”

He adds that some of Barings’ specialist products are noteworthy. “If you look at the German Growth fund, it’s strange because more funds haven’t really launched in this area, while Barings has been running it for a very long time. It is a similar story with the Korean fund.

“It is interesting that [Barings] came out with these funds a very long time ago and his stuck to its knitting. Barings was also early on global bonds, while it was early off the ground with targeted return.”

Cockerill says the firm was one of the first to open a China fund, but the Barings’ fund does not now appear on his radar because groups such as First State have performed so strongly in this area since then.

The Baring German Growth fund is an interesting case study. Aldridge says: “Where it has been popular is for those investors who are underweight Europe but are looking for exposure through a pure German play. It has performed very strongly against the DAX [index].”

He adds that the fund also provides an example of good valuations in 2011 when much of Europe – including Germany – was sold down.

“The market was driven by fear,” he says. “Germany was hit hard last year when everything sold down in the third quarter. But if you look at the underlying stocks, it doesn’t make sense. This year, Germany has performed very strongly, but we think there is more to come.”

While the Baring German Growth fund is ranked 54 out of 123 funds in its sector over three years to March 5, its return to investors is attractive. It has returned 85.3% over the timeframe, according to Morningstar.

”If you believe in an investment case you can launch a fund and then wait for the investors to come”

Income is another area of Barings’ focus. The firm has several global products that operate in this area and Aldridge says there is the potential for developing new funds in emerging market debt. “But,” he adds, “if we do this, it wouldn’t be likely until later in the year.”

Overall, Barings has a good reputation among industry professionals, especially when considering emerging markets.

Darius McDermott, the managing director of Chelsea Financial Services, says some of the group’s products and fund managers are well respected throughout the industry.

“Overall, Barings is a good house,” says McDermott. “It is especially strong in emerging markets and Europe. Some of their single country funds are interesting as well, such as the resources fund. James Buckley [a manager of European funds at Barings] does really well at his style.”

The group’s performance generally is mixed over both one and three years.

Over three years, four of its funds are top quartile performers, seven are second quartile, nine third quartile and six fourth quartile, according to Morningstar. Over one year, six are top quartile, six second quartile, nine third quartile and seven fourth quartile.

As the group settles in the latest of its pioneering products such as the Baring Global Mining fund, it will be interesting to observe if it will offer any new and exciting investment niches in the years to come.

But it must make sure to stamp authority on these areas, as it did with its German fund, and not allow competitors to steal its discoveries.

Baring Asset Management is a global fund manager with its headquarters in Londonand 11 international offices. It has assets under management of £30 billion.