Don’t view consumption growth in Asia too narrowly

A well-diversified global real-estate portfolio is an effective way to hedge against inflation and remain insulated from the U.S. economic slowdown, said fund managers from Guardian Group of Funds Ltd. (GGOF) during a conference call today.

Real estate is particularly attractive because its not correlated with other asset classes such as bonds or equities, said Gavin Graham, chief investment officer at GGOF. He also emphasized the benefits of a global real estate portfolio.

“The individual markets aren’t correlated with each other — what happens with Japanese shopping malls has very little to do with German apartments or storage units in the U.S.,” said Graham. And thus such a portfolio is relatively resistant to local economic slowdowns.

Real estate growth in China has skyrocketed in recent years as personal property rights have developed in the country, which in turn has created demand for resources that current supplies are struggling to meet.

But it’s also important not to view consumption growth in Asia too narrowly, said David Harding, managing director of Matthews International Capital Management, which manages the GGOF Asian Growth and Income Fund.

“The real things that consumers will grapple with are things like private health care, insurance, greater media development,” said Harding. “A lot of different industries that you can broadly consider consumption.” He notes that these nascent industries develop when the Chinese population grows beyond traditional “aspirational” consumption that is generally associated with consumer goods such as mobile phones.

“We don’t see these economies reverting back to the problems that they’ve had in the past,” said Harding.