In­vest­ing in Asia’s eco­nomic pow­er­houses

New fund of­fers ex­po­sure to China and In­dia

Finweek English Edition - - Offshore investments -

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.

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