Institutional investors who rely on global funds to provide adequate exposure to Asian equities will be underexposed to one of the biggest global growth regions, according to Fidelity Investment Managers.
Asia ex-Japan accounts for 6-7 per cent of the global stock exchange indices, but it accounts for 20 per cent of global gross domestic product (GDP) and more than 50 per cent of global growth, according to David Urquhart, portfolio manager of the Fidelity Asia Fund.
“If you start to ask yourself: ‘If I buy a global fund am I getting the exposure to Asia that I really should be getting?’ – even if you just wanted to bring it into line with where you see GDP figures around the world you should be more than double that,” he said.
“There’s a strong argument for having additional exposure and perhaps pure exposure to Asia because of that.”
Asia will likely continue to be a key driver of global growth over the next five to 10 years, meaning investors would want to have their investments aligned with where that growth is coming from, he said.
In terms of overall asset allocation, there is a risk in many other developed countries where funds are overly invested in defensive asset classes of fixed income and cash.
Global policies in central banks have pushed interest rates extremely low, meaning you can’t get as much as 1 per cent return on cash, and 10-year bond yield in the US are around 3 per cent, Urquardt said. But he added that there was still a lot of money that could come into Asia and push prices up further.
