The three months to the end of September were a sobering experience for most investors: all major regional indices fell (in sterling-converted terms).
Emerging markets and the Asia Pacific region were the worst hit, but our selections for these two areas held up much better than most of their peers.
Pacific Assets, our conservative Asia Pacific ex Japan choice, benefited from manager David Gait's belief that many Asian shares were dangerously overvalued, as a result of which it has had at least 10 per cent of its portfolio in cash for some time. Its minimal exposure to China also contributed to its relative resilience.
ASIA AND EMERGING MARKETS
With enthusiasm for the region suffering from fears about Chinese growth, shares in Pacific Assets have slipped from a premium to a small discount to net asset value (NAV).
But with its emphasis on sustainable domestically oriented companies, and cash to invest when the manager sees good value, it rightly remains among the most highly rated trusts in the region.
Schroder Asia Pacific, our adventurous choice, also remains cautiously positioned. Its returns were among the most resilient in its sector over the quarter, and are comparatively good over most periods, so its shares look good value on an above-average discount.
BlackRock Frontiers held up exceptionally well in the global emerging markets sector, because - as manager Sam Vecht has regularly pointed out - frontier markets are less vulnerable than emerging markets to global capital flows. Frontier markets were very cheap at the start of the period and have historically had a low correlation with developed markets.
Individually, frontier markets tend to be high risk, but Vecht mitigates this by wide diversification and active management. Over the quarter he sold out of Saudi Arabia, on the basis that the fall in the oil price had not been reflected in the equity market, and reinvested the proceeds in Kenya and Argentina.
Edinburgh Worldwide (EWI), our adventurous global choice, has had a torrid time. Like most Baillie Gifford-managed trusts, it focuses on growth companies, which have fallen from favour as concerns about global growth prospects have escalated.
The rout in biotechnology stocks has been particularly bad news for EWI as they account for around 15 per cent of its portfolio.
The trust's fortunes recovered rapidly after the spring 2015 sell-off in technology and biotech, and could do so again if the market recovers its confidence. But it could continue to underperform if global markets take a further lurch downwards.
Those who want a less volatile ride should stick with more cautiously managed options such as RIT Capital or Perpetual Income & Growth. Both of these conservative choices from the globally diversified and UK mainstream categories held up well over the quarter.
BACIT's exposure to hedge funds means it can benefit from falling as well as rising markets, but the shares of our conservative specialist choice now look expensive on a 9 per cent premium.
SMALL AND MID CAP VERSUS LARGER COMPANIES
Investors in smaller companies should note that James Henderson, who manages Lowland Investment, has been raising its exposure to larger companies at the expense of mid to smaller ones.
He says the latter tend to be more resilient in the early stages of a downturn, but can 'hit an air pocket' and fall more quickly when the stock market continues to fall.
Henderson says the setback has left many larger companies looking good value, notably HSBC, which offers an attractive and potentially rising yield.
He has also been buying into the miners, notable BHP and Glencore, but only slowly for fear he is a bit too early.
'The decline in commodity and oil prices is not over, but share prices (of the companies involved) will move up earlier,' says Henderson.
'Actions by the companies will reduce supply, and demand is not going to disappear, as building will continue and the emerging markets and the West still need more infrastructure.'
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