The funds will be moved to the specialist sector.
According to First State, the three funds: The First State Global Emerging Markets Fund, the First State Global Emerging Market Leaders Fund and the First State Global Emerging Markets Sustainability Fund, have not met the IMA’s requirement that a GEM fund be “at least 80% invested in stocks listed in what they define as GEM countries”.
“The funds in question have not met this test for a few years, not only because they own stocks listed outside GEM, but also because the Funds hold relatively high cash balances at present, fearing that many companies of sufficient quality are too expensive,” First State said.
While it could have changed the portfolios to make sure they once more met the sector requirements, the decision was taken to instead “put investment considerations first” and allow the funds to be forced out of the sector.
Richard Troue, Head of Investment Analysis at Hargreaves Lansdown said the move of sector was unlikely to have a significant impact on the funds or First State.
“I quite like the flexible approach the funds have taken. Sometimes the sector definitions can be overly burdensome and I would rather a fund stick to its strategy even if it means changing sectors, rather than change its approach to something in which they believe less, just to stay in the sector,” he added.
