Asia Series: What about China?
This week, we continue with our series on Asia and the capital allocation that we have made to this part of the word in the International Fund. Last week, we concluded that many Canadian investor portfolios have too much allocated to Canada. We noted that in terms of GDP, Canada is only 2.0% of the world and that there are lots of great investment opportunities outside of Canada. With respect to traded equities, the data is further skewed, this time to the US (Figure 1). Large parts of Global GDP are vastly underrepresented in developed market indices (Figure 2). The most obvious is China, which has the world’s second largest GDP, but is essentially ignored in major benchmarks.
In an increasingly multi-polar world, one effective investment strategy is to diversify across economies and identify opportunities that will benefit from this trend. Besides Japan, we believe China remains another region to pay attention too. China has been largely avoided by global portfolios since the 2021 tech crackdown and the government’s “safety over growth” stance. However, recent policy developments signal a shift toward pro-growth initiatives and stronger support for the private sector, particularly in technology, driven by the “DeepSeek moment.”
We believe the question is no longer whether to invest in China, but how to invest. We see signs that Beijing is strategically reshaping its economy toward domestic consumption, aiming to build a more self-reliant and sustainable growth model. At the same time, China continues to prioritize technological and energy self-sufficiency, presenting long-term opportunities in sectors such as artificial intelligence, robotics, green transition, energy storage, and the semiconductor value chain.
“This means that” we remain geographically agnostic and believe China will provide many great investment opportunities over the next decade. We will continue to work to build out our allocation there.
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Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Conviction Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
For more information, please follow the links above to review the fund term sheets.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Pathfinder Conviction Fund are presented based on the master’s series of each fund. The Pathfinder North American Equity Portfolio and The Pathfinder North American Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder North American Equity Portfolio (January 2011), Pathfinder North American High-Income Portfolio (October 2012) Pathfinder Partners’ Fund (April 2011), Pathfinder Conviction Fund (April 2013), and Pathfinder International Fund (November 2014).
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