Investing in large multinational companies to get indirect exposure to Asian emerging markets is a flawed strategy that may yield poor returns, according to Premium China Funds Management (PCFM).
"If you are not going to invest in Asia for your international equities portion, where are you going to put it? A global fund is totally flawed," PCFM head of distribution and operations Jonathan Wu said.
"Fund managers all tell you that they are going to invest in Nestle or BMW because they have got assets in China, but those assets make up such a small fraction of it that they are being diluted by the rest of the western world.
"You are seeing that China's contribution to those companies is making up between 10 per cent to 15 per cent of their entire profit and loss."
For example he said while BMW's global car deliveries grew just 12.5 per cent in the second quarter of 2010, the group's separately listed China joint-venture, called Brilliance Auto, saw deliveries surge 98 per cent.
During the period BMW saw its share price increase 32 per cent, while Brilliance jumped 240 per cent.
Wu said that allocating a part of clients' international equities portfolio to managers that invested directly in China or Asia would deliver a better outcome as the region was forecast to experience strong economic growth.
