The Challenges of Global Diversification – an Asian Investor’s Dilemma

During these stormy and challenging times, recent conversations with investment managers across Singapore, Bangkok and Hong Kong have frequently led to a recurring theme: the old rulebook of international allocation is being re-examined, sometimes reluctantly, but increasingly out of necessity.

Heightened exposure to dollar-centric risk, combined with general currency instability and divergent monetary policies is amplifying volatility. At the same time, capital allocation is increasingly influenced by geopolitical factors rather than pure market fundamentals. I have heard more than once the statement: “We used to assess companies. Now we assess governments.”

Access is another real challenge. Many Asian family offices and even some sizeable institutional investors, face limited access to strategic alternative assets due to regulatory restrictions or scale barriers. As a result, not by choice but by necessity, portfolios often remain overweight in listed equities or domestic real estate.

And then there is the gravitational pull of home. The famed “home bias trap” which is rooted in familiarity and perceived clarity, often leads to overconcentration in local assets. But in an interconnected and volatile world, that comfort can quickly become a constraint.

So where does this leave the Asian investor?

The path forward may well lie in a few key shifts:

·      Currency strategies that move beyond reactive hedging towards more anticipatory frameworks that factor in geopolitics and macroeconomic shifts
·      Forging cross-border partnerships with trusted collaborators who can bridge gaps and assist in gaining access to quality opportunities overseas
·      Governance and geopolitical filters built into due diligence and not bolted on afterwards
·      Resistance to the illusion that staying close to home is always safer

For Asian investors, as indeed elsewhere, in my view, global investing today is less about reach and more about resilience. And the best-prepared portfolios will be those that rethink not just where they invest but how.

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