What are the drawbacks of Investing in Asia?

The major drawback of investing in the region is the inherent volatility that is present across Asia Pacific equities – where returns can dwindle as easily as they surge. So it is not surprising to see Asia Pacific vehicles tending to have higher volatility ratios than much of the rest of the global economy. Put simply, funds tend to outperform when world markets go up, and underperform when they go down.

Information asymmetry is another drawback as regular reporting is not mandatory across the region, meaning that it is ‘regulation-lite’ in comparison to the West – this emphasises the importance of picking a manager with access to local intelligence with key connections at the company level, and experience of how these markets operate.

Political instability is also a key risk and contributes to the highly volatile nature and information asymmetry across the region – which is more prominent in the smaller, less developed countries in this grouping.

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