Andrew Beal, manager of the Henderson TR Pacific Investment Trust, says that the dominant force in developing economies such as China and India is not industrial growth but wage growth and the consumer story.
"The last 30 years of growth have been dominated by exports, but the next level will be based on domestic consumption," he said. "The number of people that can be considered wealthy in these countries is rising rapidly and more and more will have money to spend on things beyond the basic necessities."
Beal estimates that the number of middle class people in Asia will rise from 570 million to 945 million by 2014, and that consumer expenditure in China will double by 2020.
Asians will seek to spend this extra money on the types of goods and services that are prominent in more developed economies.
With 34.8 per cent of assets allocated to consumer discretionary, the investment trust has a large overweight compared with the MSCI AC Asia ex-Japan Index, which has a 10.2 per cent weighting.
"The proportion of spending on basic necessities will fall and spending on healthcare, travel and leisure and other lifestyle industries will dramatically increase," Beal said. "Good healthcare stocks are hard to find in Asia but I’ve been buying the other industries heavily."
Hana Tour, a Korean package holiday company, is one example of the kind of stocks Beal is interested in.
"Korea is a relatively wealthy country but historically they don’t travel much," he explained. "But this is starting to change and package tours are a safe, reliable way nervous travellers can go further afield. Other companies which I own that are playing on the same theme are Chinese travel company Ctrip, Air China and Macao-based gaming resort specialist Sands China."
The manager says one of the main drivers behind his investment philosophy is to ask what products and services people will need as they get wealthier.
"Financial services are an area where we’re finding opportunities," he continued. "Credit cards per capita and mortgages as a percentage of GDP have huge potential to grow in the Asia Pacific region."
"Only 30 per cent of Indians have a bank account and less than 1 per cent of Chinese people have a credit card, so this sector is very exciting," he added. "Most banks in the region are very liquid, simply getting out into rural areas and connecting up commercial sectors is going to bring huge amounts of growth. Most emerging markets are hugely under-penetrated."
While the auto industry is a much-cited example when talking about the potential for growth in emerging markets, Beal says that its importance cannot be ignored.
"In India we own Tata motors. The company has just bought Jaguar Land Rover, a dominant but largely under-exploited brand."
Beal is finding opportunities in a huge number of luxury industries, including satellite television, convenience stores, electrical goods, housing, luxury fashion and take-away food.
According to data from FE Analytics, the Henderson TR Pacific Investment Trust has returned 241.03 per cent over the last decade, which is almost identical to its benchmark.
Performance of fund vs sector over 10-yrs
Source: FE Analytics
Investors who are interested in the luxury consumer growth story may also like the Julius Bear Luxury Brands fund.
Dr Scilla Huang Sun, who heads up the fund, commented: "Luxury brands offer exposure to a growing industry with high profitability and pricing power. Margins are very good and much of the growth is coming from emerging markets."
"China currently accounts for 5.8 per cent of the world's share of luxury brands but by 2020 this is expected to rise to 23.1 per cent."