Investing in Asia’s economic powerhouses
New fund offers exposure to China and India
IT’S NOT EVERY DAY that a leading international asset management company launches a unique fund, but that’s what Ashburton has done.
It has started what it calls the Chindia (China/India) Equity Fund, which offers investors exposure to two of the world’s most exciting economies.
Other international asset managers have launched BRIC (Brazil, Russia, India and China) funds, but no one else has focused exclusively on the two Asian powerhouses in a single fund.
The investment objective is to achieve long-term capital growth through a diversified portfolio of equity or equity-related instruments predominantly in the Chinese and Indian stockmarkets. The fund will also invest in multinationals and other companies traded in markets where a significant proportion of their growth is set to come from China or India.
The risk level is on the higher side, with potential for significant short-term share price volatility. The fund is managed, however, by Jonathan Schiessel, Ashburton’s Asia Pacific specialist, who has built up a formidable track record as portfolio manager of his company’s Asia Pacific Fund. It’s currently in the top quartile of funds in its universe over the 10 years since its launch.
Craig Farley, who is based in Jersey and co-runs Ashburton’s Chindia and Asia Pacific funds with Schiessel, says: “Viewing China and India together, which we call Chindia, these two giant nations will increasingly become the largest growth market for many goods and services on the globe.
“Already, demand from Chindia is having a profound effect on the supply-anddemand dynamics of a whole host of products ranging from oil to natural gas, nickel to gold, wheat to sugar, mobile handsets to desktop computers, to name a few. The socio-economic changes being wrought both in China and India will reshape the global landscape to something profoundly different from that in the last 100 years.”
At the heart of this profound change, Farley says, is demographics. Chindia has a classic population pyramid – a large base of young people supporting a small ageing population. Indeed, Indian demographics are possibly the best on the globe. This is in sharp contrast to the rapidly ageing western societies and Japan, where population growth is expected to turn negative.
It’s estimated that more than 250m people will be added to the working population of Chindia by 2020. The population is getting younger, better educated and increasingly urban, with incomes growing strongly.
Farley says good demographics alone don’t assure economic growth. “Positive demographics in China and India, in conjunction with economic reforms, have led to remarkable economic growth. For example, in the past three years Chindia’s GDP has nearly doubled and expectations are that the combined economies will be second only to the US by 2020.”
Farley concedes there will be plenty of hurdles along the way, but says given that Chindia will become an increasingly important destination for long-term capital, investors who ignore it will do so at their peril. The ideal time horizon for investing in the fund is put at upwards of 10 years.