"I noticed your reply to a subscriber about listing an iShares Far East Smaller Company ETF. I have a holding in the Aberdeen Asian Smaller Cos IT which has performed far better. I know David holds Aberdeen ITs. I think this may be a case where paying fees to good fund managers makes sense. It may also be true of Scottish Oriental IT too but I haven't checked.

"Keep up your good and interesting work!"

Eoin Treacy's view Thank you for this topical email. We are unreservedly wary of fund fees because so many tend to be nothing more than closet trackers, run for the benefit of the managers rather than investors. However, in an asset class difficult to replicate with an ETF or where there is less liquidity or when the constituents are more difficult to value, a research driven manager can outperform by a wide margin. In such circumstances one might deem higher fund or performance fees acceptable.

As you point out, both the Aberdeen Asian Smaller Companies IT and the Scottish Oriental Smaller Companies IT share a similar pattern of outperformance relative to the iShares MSCI Far East Ex-Japan SmallCap ETF which helps to justify the their fees

The Aberdeen Asian Smaller Companies IT, managed by Hugh Young, has accelerated of late and the discount to NAV has narrowed to 3% from 19% in May. The first clear downward dynamic, sustained for more than a day or two will likely signal the onset of a medium-term reversion towards the mean defined by the 200-day MA.

The Scottish Oriental Smaller Companies IT managed by Susie Rippingall has posted a remarkably consistent advance and is not as overextended as the Aberdeen fund. The discount to NAV has narrowed to 7.64% from around 14% in May and June. Given the consistency of the advance, it is due another consolidation and would be better bought following a reversion to the mean.