FTAdviser.com

Advertising

Investors must look beyond the obvious infrastructure and agriculture plays to find the best ideas in Asia, according to the manager of Fidelity International’s recently launched £6.2m Asian Aggressive fund.

The high-octane fund went live on 18 February and is run by veteran manager David Urquhart.

He pointed to predictions that emerging market infrastructure spending would more than double in the next 10 years and reach around £1.75bn - the majority of which would be in Asia.

As a result, the manager said various different sectors could benefit, not just infrastructure companies themselves.

"The chain starts with mining – coal, iron ore and other materials," Mr Urquhart explained. "Shipping and logistics companies are then required to transport the materials. Banks are called on to fund construction projects and the firms that do the construction work need equipment."

He also said agriculture meant more than just food. "Seed, fertilisers, pesticides and equipment are all required by farmers. They also need land, logistics companies to transport their produce to food and beverage companies, and then on to supermarkets."

Asia currently consumes almost two-thirds of the world’s soya beans and one-third of the world’s milk and meat, and their consumption is growing rapidly, he added.

"But it’s not just the companies in the countries where demand is highest that are benefiting from this trend," said Mr Urquhart. "Australia exports 19 per cent of the world’s beef and 10 per cent of wheat. As part of the wider Asia region, it should benefit too."

The Hong Kong-based manager has focused on Asia for 25 years, and ran single-country funds investing in Australia, Korea and Singapore. He has also managed region-wide institutional mandates for Fidelity.

The Asian Aggressive fund’s largest geographical sector allocation is Australia at 30.4 per cent of the portfolio, ahead of the benchmark MSCI All Countries Asia Pacific ex Japan Index weighting of 28.4 per cent.

Mr Urquhart said a stock which is benefiting from both agricultural and infrastructure themes was Australian engineering and construction company Leighton Holdings.

"The company is enjoying a strong outlook for all parts of its business at the moment. Its contract mining work is strong and it is looking to enter new markets in Mongolia and Russia. It became a top five player in the Indian market within two years of entry and a shortage of skills in the region are driving margins higher," he said.

From launch until 27 June, the fund has fallen by 9.17 per cent, underperfoming the IMA Asian Pacific Ex Japan sector, which fell by 8.99 per cent. It is ranked 45th out of 79 funds in the peer group, according to Morningstar.