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First Sentier Dividend Advantage vs MSCI Emerging Market Performance.

I have a friend who asked me about the performance of First Sentier FSSA Dividend Advantage against the Emerging Market index.

FSSA Dividend Advantage is one of the most popular funds since I started investing in 2003.

Comparing the performance of Dividend Advantage to an Emerging Market index is an apples-to-orange comparison.

That aside, here is the annualized total returns:

iShares MSCI Emerging Market IMI Index ETF (EIMI)8.4%8.7%17.7%-0.7%4.2%
FSSA Dividend Advantage8.0%8.4%-0.4%-4.3%2.9%

I adjust the EIMI, which is a USD denominated index, to factor in SGD appreciation over the different time periods.

EIMI is doing better than the FSSA Dividend Advantage.

But there may be not much surprises because we are comparison a portfolio of Asia stocks against Emerging market stocks.

Here is the region allocation for First Sentier Dividend Advantage:

And this is EIMI:

The biggest difference is how much of South Korea, Brazil, Saudi Arabia and South Africa over Dividend Advantage’s allocation.

The funds live and die by their holdings.

We should take a look at some longer term performance, and a greater data set if we are curious about whether it is a good idea to switch to an emerging market fund.

In the chart below, I collated the rolling 5-year annualized returns of the MSCI All Country Asia Pacific ex Japan index against the MSCI Emerging Market index:

We have returns data from 2001 to April 2024, which allowd us to reflect upon 221 unique 5-year returns.

Any point on this chart is an annualized return so 39.9% is the annualized return if you start investing in Oct 2002 to Sep 2006.

You may notice that the green line (Emerging markets) is consistently above the purple line (AC Asia Pacific ex Japan) if you invest before 2008 and since then, the AC Asia Pacific ex Japan have done better.

But not by much.

There are certain 5-year periods where the difference is significant enough. The five year periods starting in Jan 2010 is one. If you are in MSCI Emerging markets, your annualized return will be -5.6% p.a. but if you are in AC Asia Pacific ex Japan, it will be better at -1.5% p.a.

What can we learn from this? There are a few major countries that make up a sizable composition of both Asia Pacific ex Japan and Emerging markets and so what will separate the performance is the performance of those countries that is present in one and not in another.

Brazil and South Africa may be some of the major countries.

I leave it to my friend to make his investment decision.

I invested in a diversified portfolio of exchange-traded funds (ETF) and stocks listed in the US, Hong Kong and London.

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