@scjim, I think that there is likely to be short-term pain for these areas. A combination of China’s transition to more of a service-based economy from largely being manufacturing, and the lead-up to the first rise in US interest rates.
In the absence of any other markets taking up the manufacturing slack, the China transition should continue to lead to lower demand for both commodities and for component goods manufactured in other FE/EMs. So a negative impact for all areas - although it could lead to an opportunity for EM manufacturers of finished products if a service economy leads to incresed wealth for Chinese consumers.
Whilst EM governments are less dependent upon US Dollar-denominated debt than in the past and so should not suffer to the same degree as in the past when US rates start to rise, e.g… the late 1990s, EM corporations are more indebted now than they were then, and some of this debt is denominated in USD. So there is the potential for these companies to take a further hit once interest rates do rise. If the argument is that the rises are being delayed further into the future, then what does this say about the state of global economy - and not just the USA - and what does it say for the prospects for these companies? Plus others in other regions, for that matter.
However, markets tend to be forward looking, so some, if not most of this should already be priced in - hence the falls over recent times. There is always the possibility of a bounce in prices once the ‘bad news’ about the first rise is out of the way - purely a speculative bit of wandering on my part on a Sunday morning rather than a dead-certainty prediction!
So what to suggest about your holdings. Difficult to say without knowing how they fit in with your overall portfolio. For instance, if you were to say that in total, these trusts constituted 10% of your portfolio, then I’d suggest keeping this level of allocation but to consolidate into a fewer number of holdings. I would definitely get rid of JRS for the simple fact that it is as much a gamble on the Russian political establishment as on the Russian economy. Whilst it might offer a contrarian entry point into lower-valued companies, the uncertainty over politics has to make it a highly speculative proposition, and could remain so for a good number of years to come. ANW? What does this add to your portfolio that any of the other trusts with exposure to Asia and EMs do not? Certainly, either TEM or JMG, but not both, unless these are consolidated into the three other ITs which you intend to retain.
If these ITs did constitute 100% of the portfolio, then yes - diversify into the other areas under consideration. Although both UK small and mid caps have had strong runs over recent years, so the question then is whether continued growth in these areas can continue.
For my part, I have holdings in BRCI, CYN and AAIF. The first two are relatively recent additions and are just a speculative punt on the sector, with BRCI being the latest. I’m down around 25% on CYN and 12% with BRCI, both capital-only returns. Their only saving grace is that they are not as bad as New City Energy, which is down 50%! (although ‘only’ 47% including income received…). My reason for going BRCI rather than BRWM is that the former includes oil-related stocks, so has a wider diversification of company types within this particular sector. BRWM’s problems with mining royalties was not a factor in the decision. I have been considering another top-up to BRCI, but RDSB recently won out on these stakes so I am likely to hold on for a while longer.
Unlike the other two, AAIF is a core holding for me and my interest is primarily for the income. I have also been considering a top-up here, too, but this IT is in competition with HgCapital for this - which I realise sounds completely daft with how different the two are, but that’s just my current situation with regards to my objectives and currently available resourses. And no - I’m not thinking about splitting the investment between the two!
As a summary then: the decision as to whether to reduce in these areas should depend upon the percentage size of your current exposure. If you’re looking at total return (i.e. growth) then the alternatives also have their issues - unless you think EU QE is capable of boosting european stocks once events unfold elsewhere. But I would consolidate into fewer trusts.