This is surprising, because most leading analysts suggest a weighting of up to 20 per cent in Europe, the emerging markets and the Far East. For example, China is an attractive proposition as a result of a number of legal and economic developments.
First, the Chinese cabinet has slashed the tax that companies pay by about 12 per cent. This should aid profitability for those companies, as will the opening up of financial systems and some dismantling of family-owned businesses.
Second, last August, China's State Administration of Foreign Exchange introduced the so-called qualified domestic institutional investor, or QDII, programme. This will allow domestic banks and investors the opportunity to invest as much as 50 per cent of funds in foreign stock markets for the first time.
As a result, China's domestic stock market will cool. The CSI 300 Index - which tracks the daily price performance of the 300 most representative A-share stocks listed on the Shanghai or Shenzhen Stock Exchanges - surged ahead by 81 per cent in 2007 after more than doubling in 2006. The new programme should alleviate the strength of the yuan by helping to soften it in relation to other currencies.
The mainland Chinese economy opened in 1978 and it wasn't until 2001, when A-shares were complemented with B-share listings (US dollars or Hong Kong-based dollars) that any real investment choice was available. When this happened, millions were raised on the first day of release and the market rose rapidly.
Similar market conditions prevail today. Moreover, the 42 Chinese companies listed in both Hong Kong and the mainland are cheaper in Hong Kong: 19 of these companies are trading at less than half the price of their China-listed stocks, which looks like a real buying opportunity.
Given the investment in infrastructure and technology for the Beijing Olympics, which will be held this August, and with savings rates in Chinese banks languishing well below the inflationary 3 per cent level, it is clear where the appetite to invest elsewhere comes from. Clearly, currency, liquidity and volatility risks are associated with this approach. But as a small part of a balanced asset allocation, they can be a vital component of any charity's multi-asset portfolio.
- Dr Markas Gilmartin is adviser director at AWD Chase de Vere