Concentrate on Hong Kong and China with Invesco

We think the Invesco Perpetual Hong Kong & China fund (ISIN: GB0033028332) could fit the bill. It has pipped each and every rival in the Investment Management Association's China/Greater China sector over the last year and is also a top five performer over three years, despite a shakier effort over five years.

But investing in a concentrated China and Hong Kong fund is not for the faint-hearted, and for this reason analysts are mixed on recommending Invesco's offering. But if you've already got a global emerging fund in your portfolio and want some more direct exposure to Hong Kong, China and Taiwan, making a bold move like this could serve you well.

Its management team is Hong Kong-based and is headed up by Mike Shiao, who has an impressive 21 years' experience in investing in the region. He started his investment career in 1992 at Grand Regent Investment, Hong Kong, supervising venture capital investments in Taiwan and China and has a strong track record.

He's confident China's economic recovery will continue and says its economic data speak volumes. The government expects to deliver growth of 7.5 per cent in 2013, while close to 13 per cent of China's population still live on less than $1.25 per day. But by 2020 China will have 167m households with annual disposable incomes of between $16,000 and $34,000. The potential is huge. And he's also expecting greater activity in economic reforms with the new Chinese leadership due to take office.

His strategy is value-based. In terms of the fund positioning, he's relying on the increase domestic consumption to drive growth. He's particularly keen on companies with sustainable market leadership and competitive advantages but seeks to avoid stocks where earnings may disappoint.

The fund has an overweight position in the consumer discretionary and staples sectors, relative to its benchmark (MSCI Zhong Hua index), mainly because it has a bottom-up stock selection process. And it is underweight in the utilities sector, with Shaio saying he prefers opportunities available elsewhere.

Darius McDermott, financial planner at Chelsea Financial Services, said: "This fund has a higher return on equity than the index, which means it focuses on quality businesses and industry leaders. It has around 40 per cent invested directly in China and has a mid- and small-cap bias. We like that. It is a fund we are looking at to replace First State China, which was on our buy list when it was still open."

Chinese funds tend to be on the expensive side, but with a total expense ratio (TER) of 1.68 per cent, this fund looks reasonable compared with its peers, which have an average TER of 1.91 per cent. If you're looking for a risk injection for your portfolio and feel confident enough to take a punt on the growth story of Hong Kong and China, buy.

INVESCO PERPETUAL HONG KONG & CHINA FUND (ISIN: GB0033028332)

Source: Morningstar. Price and performance data as at 19 March 2013.