Asia’s emergence as the world’s key engine of growth has been one of the most sought-after investment stories in recent times. The newly launched Capital Group Asian Horizon Fund (LUX)¹ is designed to tap into this attractive opportunity set and, in this Q&A, portfolio manager Christopher Thomsen explains why he believes the fund has both the foundation and the characteristics to identify the champions of tomorrow.

How did the idea of the Asian Horizon Fund come about?

The Asia ex-Japan mandate is one of the bigger mandates that both the institutional and retail markets like to follow. There are a couple of reasons why it has generated such a big following. The obvious explanation is the rise of the region as an economic powerhouse. If you look at the projections, Asia is expected to account for close to 40% of global GDP within the next five years. That is a startling figure especially when you consider the fact that it only accounted for a little more than 15% of global GDP at the turn of the millennial. The two countries that have really led the way for the region are China and India. And as they get increasingly larger and more integrated into global indices, investors will only naturally gravitate more towards them.

The other reason why investors globally are so passionate about Asia is the rise of consumers within the region. Asia’s rapidly growing middle class and millennial generation have brought about a huge rise in the demand of everything from luxury goods, cosmetics, healthcare and financial services. These are trends that are going to have massive impact on long-term growth in spending and investors have every reason to be excited about this part of the world.

But if you look at Capital Group’s original suite of offerings, we have never had a product that specifically targets this investment universe. The closest we have is the Capital Group New World Fund (LUX), which is based on a global emerging markets mandate. The launch of the Asian Horizon Fund is therefore a great opportunity for us to not only meet the growing investor appetite for Asia-related stocks but also for us to enhance our own product range.

What are Capital Group’s strengths when it comes to investing in Asia?

Our long history of investing in the region and deep local as well as global research capabilities are key strengths that separate us from the competition. Capital Group has been investing in this part of the world since the 1980s² and we have an incredibly deep local and global research team that supports our entire spectrum of funds from small caps to large caps and across every sector as well as industry. To put things into perspective, we have 29³ investment professionals based in Asia ex-Japan, including equity analysts, industry specialists and economists based out of our research and consulting offices in Hong Kong, Singapore, Shanghai and Mumbai.

The local team has direct access to a global research network of close to 100 equity analysts who between them have an average of 15 years of experience². The way we structure our research teams is key because they are essentially divided into global industry clusters. So, the financial cluster will consist of all the analysts covering the sector out of the US, Europe, China, Japan and Latin America. They will regularly come together to discuss key developments such as fintech or global payments in order to come up with a view on secular growth trends as well as risks. It is important because as economies become increasingly interconnected, developments in one market can be mirrored onto one market, onto a region or even globally fairly quickly.

 

1. Fund launch date: 24 March 2021. Source: Capital Group

2. First investment in Korea, Thailand, Philippines and Malaysia in 1986. Data as 31 December 2020. Source: Capital Group

3. Data as at 31 December 2020. Source: Capital Group

 

Risk factors you should consider before investing:

• This material is not intended to provide investment advice or be considered a personal recommendation.
• The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
• Past results are not a guide to future results.
• If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease. Currency hedging seeks to limit this, but there is no guarantee that hedging will be totally successful.
• Depending on the strategy, risks may be associated with investing in fixed income, derivatives, emerging markets and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.