A fully flexible way to invest
3 minute read
When we read about investing in the Asia Pacific region, all eyes look towards China. And while China dominates the space, there is a whole Asia-wide growth story developing. Investors in this space could do well by looking at opportunities across the wider region, rather than limiting themselves to just one country.
Who's it for? All investors
China has a place in a globally diversified investment portfolio. But investing in Asia is a much bigger story that encompasses the whole of the Asia Pacific region. This part of the world has changed beyond recognition over the last 25 years.
The escalation of a trade war between the US and China over the last few years has highlighted to many just how less reliant Asia has become on exports to the West. ‘Intra-Asia demand’ is a term used to explain the trade that carries on between one Asian country and other, and this trade has been increasing quite considerably for many years.
In fact, in November last year, 10 South-East Asian countries including China, South Korea, and Australia, formed the world’s largest trading bloc, called the Regional Comprehensive Economic Partnership (RCEP). This multilateral trade pact covers a region that makes up nearly a third of the world’s population – dwarfing all other global trade agreements ever in history. It highlights just how important Asia is in terms of an independent economic entity without reliance on western economies.
As the population in Asia has grown, and continues to grow, we have witnessed a change in lifestyles. We have already seen a rise in net disposal income per household, which means more money to spend on consumer goods such as washing machines and cars. This has taken a further leap forward with households today having sufficient income to spend on luxury goods such as mobile phones and jewellery. And this boost in spending has led to the creation of giant Asian companies to meet the demand.
Here, we look at three funds that invest across Asia, attempting to capture this regional growth phenomenon.
A fund that very much focuses on the whole domestic growth story in Asia. This fund is managed by one of the most experienced and largest teams of analysts in Asia. This is a considerable advantage bearing in mind the many different countries in the region and the vast number of companies available to invest in.
It’s a simple approach that involves looking to invest in companies whose earnings are growing at a faster rate than the average company. The fund manager looks to invest in about 90 of these companies which he believes are simply underappreciated by most investors. It’s an investment process the team has stuck by for a very long time.
While there are a healthy number of funds that invest in Asian equities, only a few focus on delivering a high income yield. The investment team at Janus Henderson believes Asia offers an attractive opportunity for income, given an abundance of companies that are in good financial health, and that are able to generate lots of cash and increasingly pay this out as dividends to investors.
The trend of high or growing income yields is supported in part by ageing populations in Asia who are increasingly looking for investments that pay an income. The fund focuses on finding companies that have strong and growing cash flows, which the manager believes not only supports sustainable dividends, but could also lead to future dividend and share price growth.
What sets this fund out against other Asian funds is the focus on what they call ‘defensive’ companies. They do this by looking for high quality companies that have the potential to deliver sustainable and predictable growth over the long term, but instead of just focusing on how far the share price can go up, they also look at the possible downside – how much they could possibly lose. They do this in an attempt to mitigate losses when markets are falling.
Investors need to bear in mind that making money over the long term is not just about trying to identify the most successful companies, it’s also about trying to avoid the pitfalls and dangers when markets fall.
Asia is an exciting place to be. As an investor, it could be an attractive region to consider if you have a long-term investment horizon. These three funds are part of a wider list of funds that you can find on the Barclays Funds List. Find out more information on these funds.
If you prefer to take an even more ‘general’ exposure to emerging markets, you may also wish to look at funds that invest across the entire global emerging markets space. There are two such funds on the Barclays Funds List.
Correct at the time of publishing.
To diversify your investment, you may like to consider our own Barclays Ready-made Investments (RMI). The RMI are just one example of a range of diversified funds which allow you to select the level of risk you are most comfortable with. These Barclays multi-asset funds invest in passive funds across a range of asset classes and regions, offering a globally diversified solution for investors. Ready-made Investments are not the only funds that we offer and they won’t be appropriate for everyone.
Past performance of the fund and its manager are not a reliable indicator of their future performance.
We don’t offer personal investment advice so if you’re unsure you should seek that independently.
Funds are designed for the long term so you should only consider them if you can stay invested for at least five years.
These are our current opinions but the future, as ever, is uncertain and outcomes may differ.
Read the Assessment of Value report [PDF, 3.2MB] for funds run by Barclays.
The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.
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