There are huge disparities in performance between the top and bottom performing Asia funds, as our table shows.Risk varies according to asset allocation. Hong Kong, Malaysia and Singapore are no longer viewed as emerging and fund managers pressing the Asia case believe a core holding of 10 per cent in Asia alone is reasonable. Mr Fuller also points out that Deng Xiaoping only has to say boo and the Taiwanese stockmarket goes into a tailspin.Whatever the risks, investors looking for capital growth rather than income may be tempted to tuck some Eastern promise into their portfolios But they must consider how much and what fund. Abtrust estimates that across Asia, smaller companies are at a 30 per cent discount to their larger counterparts. The key downside factors, according to Peter Fuller of independent fund analysts Fund Research, are US interest rates, the US dollar and political risk.The Mexico effect, where US interest rate policy led to a large outflow of foreign capital can equally easily happen in Asia and the strength or weakness of the US dollar affects investment returns. Tim Guinness, joint managing director of Guinness Flight, points out that the Hang Seng index, composed of big companies, is on a price multiple of 12 times earnings, but the multiple for Hong Kong’s small companies is a mere six times earnings.

Small companies have been neglected, but their growth potential is greater. Foreign money flowing into the region in the past five years has been directed at big companies. Ten years ago choice was confined to a limited number of major companies in Hong Kong, Malaysia and Singapore. There are now many more markets and many more companies.The arguments for Asian smaller companies are even more compelling. As markets like Hong Kong mature, new ones in China, India and elsewhere open up to foreign investment Risk is tempered by greater diversity.

Ninety per cent of the 2.8 billion population are under retirement age, providing a huge, cheap labour force and a vast domestic market.
Industrial revolution is gathering pace. The arguments for investing in Asia hinge on economic growth and demographics. Real gross domestic product (GDP) growth in Asian economies over the past 18 years has averaged 7.2 per cent a year against 2.6 per cent in industrialised countries. And Abtrust’s Asian Smaller Companies investment trust is being placed with institutions, but will be be available to private investors.

Schroders’ AsiaPacific investment trust is for small investors with a minimum subscription of pounds 2,000. But, as someone to listen to about the markets, it makes him virtually impossible to trust.Soros on Soros Published by John Wiley, pounds 14.99.. Over the past year funds covering Asian and Pacific economies (excluding Japan) have fared poorly – nearly all show a loss However, the long term prospects remain good

Three funds are now in various stages of launch. There is Guinness Flight’s Asian Smaller Companies unit trust, a sub-fund of its Guernsey umbrella fund. The reason Soros makes so much money stems from his ability to stand outside the markets and find the fautls in its current thinking.His fund is a laboratory that is constantly testing investment hypotheses and probing for its flaws. This flies in the face of conventional wisdom that the way to make money as an investor is to find a disciplined way of investing and stick to itThis fluidity is surely the key to his success.

Most readers of his books say they come away baffled by the investment methods he describes.I don’t believe a word that Soros says about the markets; nor, I think, should anyone else. Just as remarkable is that he has changed the way the fund operates at least four times since he first set it up. For Soros, it would be a terrible year.The upshot of these arrangements is that Soros has what is arguably the purest performance-driven investment vehicle of its kind anywhere in the world. (If the stock market falls 10 per cent in a year, any pension fund manager who loses only eight per cent is reckoned to have done exceptionally well. Soros by contrast retains asignificant ownership interest in his funds. He takes a share of the profits when the fund goes up – and nothing if the fund goes down. It puts the focus on the absolute performance of the fund, not on how well it does relative to everbody else.