Money manager Fidelity saw a surge of cash into a Southeast Asian equities mutual fund this summer, helping it leap past $2 billion in size and overtake a long-time leading rival product from J.P. Morgan (JPM.N).
Fidelity's ASEAN fund has attracted estimated net inflows of $460 million in the last three months alone to become, for the first time in more than six years, the largest fund focusing on the region, data from Thomson Reuters Lipper showed.
The inflows underscore the popularity of Southeast Asia at a time when key emerging market economies are seeing outflows. The region of 600 million people has a combined economy of $2 trillion that is boosted by domestic consumption, public spending and a growing middle class.
It also shows that Southeast Asian investors are getting choosier, and gravitating towards better-performing funds.
"It's been a good story to market," Medha Samant, a Hong Kong-based investment director at Fidelity Worldwide Investment, said in a telephone interview.
"Clients are increasingly feeling that ASEAN markets are in a much stronger position to weather a global economic downturn compared to 10 years ago," she said.
Assets of Southeast Asia-focused funds tracked by Lipper stood at $7.8 billion at the end of July, the highest since December 2007. Other offshore funds investing into individual countries in the region managed a further $16 billion.
More than 50 mutual funds focus on Southeast Asia stock investments, nearly double from five years ago, and the inflows for Fidelity and some others such as Japan's Daiwa will help draw investor attention to the region as other Asian countries such as China and India slow. The inflows could ultimately help deepen the region's relatively illiquid markets.
Offshore equity funds dedicated to China and India saw a combined $2.4 billion of net outflows, according to Lipper data. Even offshore equity funds investing in emerging market such as Brazil have seen net outflows worth $826 million in the first seven months of 2012.
A prolonged period of weak performance has driven some investors away from J.P. Morgan Asset Management's $2 billion JF ASEAN Fund, leading to an estimated $78 million in outflows in 2012 and benefitting the rival Fidelity product, Lipper data showed.
The Fidelity Funds-ASEAN has grabbed $814 million, nearly three-fourths of the estimated $1 billion of net inflows into funds investing in all of Southeast Asia this year.
"This may be attributed to the ability of Fidelity's fund to consistently deliver better returns than the JF fund, particularly since the first quarter of 2011," said Eric Wong, head of Lipper Hong Kong research.
Fidelity's fund has gained 14.3 percent in the year to end-August, helped by a 25 percent jump in top holdings such as Singapore banks DBS Group (DBSM.SI) and United Overseas Bank (UOBH.SI).
By comparison, its benchmark MSCI South East Asia index is up 13.6 percent. The J.P Morgan fund trails with gains of 12.8 percent during the period, Lipper data showed. The fund also lags its benchmark over one-, three- and five-year periods.
Fidelity's fund managed $2.4 billion at the end of August, while the one from J.P. Morgan had just over $2 billion. They are the only two offshore ASEAN-focused stock funds with assets of more than $2 billion.
"We saw some profit-taking in the first quarter since ASEAN economies have performed well since the global financial crisis," Pauline Ng, a managing director at J.P. Morgan Asset Management, said in an e-mail. "Over the second quarter ending June 30th, we have seen net inflows again."
(Writing by Muralikumar Anantharaman; Editing by Michael Flaherty and Jacqueline Wong)