If you have £2,000 to invest, I think putting your money to work in Asia, the fastest growing economic region in the world could be a lucrative decision.
However, with over 3,000 companies listed in India alone, investing in the region is best left to the professionals. With that in mind, here are two top performing Asia-focused investment trusts that I believe are worth your money today.
The Schroder Asia Pacific Fund (LSE: SDP) is one of the most recommended Asia-focused (ex-Japan) investment trusts listed in London today. Assets of the trust are spread throughout the region. 31% of assets are invested in China, 20% in Hong Kong, 17% in South Korea and 22% split between Taiwan and India. The remainder is invested in smaller Asian economies.
Schroder’s largest holding is Taiwan Semiconductor Manufacturing, the world’s largest dedicated independent semiconductor foundry, which has seen sales nearly double since 2013 thanks to the booming global tech market. Other significant holdings include Chinese tech giants Alibaba and Tencent, both rivals to the Western world’s Amazon and Google.
Well-timed bets on Aisa’s fastest-growing tech companies have helped the Schroder’s fund churn out a 91% return for investors over the past five years. This performance actually understates the real return because at the time of writing the trust is trading at a discount to net asset value (NAV) of 10.6%.
The annual operating charge for the fund is 1% and it yields 1.3%.
In comparison to Schroder, the Pacific Horizon (LSE: PHI) investment trust has a much higher exposure to China. Around 12% of the firm’s assets are invested in Alibaba and Tencent, compared to 10% for its peer fund. Other top China holdings include JD.Com, Geely Automobile Holdings and Ping An Insurance.
The extra China exposure has undoubtedly paid off for the firm in recent years. Over the past five years, the investment trust has produced a return for shareholders of 116%, excluding dividends. And I think this is just a taste of things to come. Alibaba and Tencent are two of China’s largest and most successful tech companies, both are spending billions to grow their businesses and expand further, both across China and the rest of the world.
The one downside of this investment compared to Schroder is that it is slightly more expensive, and lacks a dividend yield. The annual operating charge is 1.07%, and the trust currently trades at a 1.8% discount to NAV.
So, if you’re looking for an undervalued bet on Asia’s economic growth, Schroder might be the better buy. Nevertheless, I’m positive about the outlook for both of these trusts.
Asia comprises a full 30% of the world’s land area with 60% of the world’s current population. It is estimated that the population of both China and India will surpass 1.5bn by 2022, presenting companies with a vast market of mostly young consumers.
Against this backdrop, I reckon these regions could be the best place to invest for the next decade. Both Pacific Horizon and Schroder Asia Pacific can help you gain this exposure without having to take on too much risk.
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Rupert Hargreaves owns no share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (A shares) and Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.