By Cameron Robertson, Portfolio Manager, Platinum Asia Fund
Passive investing has been one of the biggest changes in investing over the past decade. It has made it incredibly easy to gain exposure to entire markets with a single trade, and for many investors, buying an Asia ETF seems like a straightforward way to diversify internationally.
But does buying an Asia index really mean you’re buying Asia?
Asia is home to almost 60% of the world’s population and some of the world’s most diverse economies. Yet many of today’s Asia equity indices are dominated by a handful of technology companies in Taiwan and South Korea. You can largely thank AI for that.
The enormous demand for advanced semiconductors has propelled companies such as TSMC, Samsung Electronics and SK Hynix to become some of Asia’s largest listed businesses. As their share prices have risen, so too have their weights in market capitalisation indices. As at 30 June 2026, technology represented almost 70% of the iShares Asia 50 ETF.
There is nothing unusual about this. Market capitalisation indices are designed to allocate more capital to companies as they become larger. The question is whether the end result still provides the broad exposure to Asia that many investors think they’re buying.
Figure 1: Active and passive Asia portfolios can look very different
Figure 1. Country allocations at 31 July 2026. The chart highlights how the iShares Asia 50 ETF is heavily concentrated in Taiwan and South Korea, while a bottom-up active portfolio has broader exposure across Asia, including China, Vietnam and Indonesia. Source: Platinum Asset Management, Morningstar Direct, 31 July 2026.
Markets aren’t economies
The current concentration isn’t really a reflection of Asia itself.
If you looked at the region through almost any other lens—population, economic output, domestic consumption or even the number of listed companies—China and India would dominate. Taiwan and South Korea are highly successful economies with world-class businesses, but they represent only part of the investment opportunity across Asia.
The difference comes down to how indices are built. Index providers don’t simply weight countries by the size of their share markets. They also adjust for factors such as free float, liquidity, foreign ownership restrictions and ease of market access. Combine those adjustments with market-cap weighting and it’s not surprising that Taiwan and South Korea carry much larger weights than many investors would expect.
The AI boom has only amplified this effect. As semiconductor companies have become more valuable, they have become larger parts of the index. The result is that today’s benchmarks increasingly reflect a relatively narrow group of companies and a single investment theme.
Diversification isn’t just about the number of holdings
This creates an interesting outcome for investors.
An ETF might hold dozens of companies across several countries, yet a significant proportion of its returns can still be driven by the same handful of businesses exposed to AI infrastructure and semiconductor demand.
That has been an excellent place to be invested over the past couple of years. But markets rarely move in a straight line. If leadership broadens beyond technology, or expectations around AI begin to moderate, investors may discover their Asia allocation is more concentrated than they realised.
Diversification isn’t simply about owning more companies. It’s about having different drivers of return.
Asia is much bigger than the benchmark
One of the reasons Asia is such an attractive investment region is because every country is different. India isn’t Korea. Vietnam isn’t China. Singapore isn’t Indonesia. Each has its own economic strengths, policy settings and long-term growth drivers.
Traditional benchmarks don’t always capture that diversity. Their focus naturally gravitates towards the largest and most liquid companies, which means many attractive businesses, sectors and even countries receive relatively little representation.
That’s where active management can add value. Rather than being constrained by index weights, active managers can look across the region for opportunities wherever they exist. That doesn’t mean avoiding Asia’s largest technology companies. They remain exceptional businesses. It simply means having the flexibility to own them when they offer value, while also investing in parts of Asia that receive far less attention from benchmark-driven investors.
Looking beyond the benchmark
This isn’t really an argument about active versus passive investing.
For many investors, the two approaches work well together. Passive strategies provide efficient, low-cost market exposure, while active strategies can complement that exposure by investing beyond benchmark constraints and reducing concentration in a handful of companies, sectors or countries.
The more important point is that today’s indices are producing a version of Asia that is much narrower than many investors realise. Understanding how those benchmarks are constructed, and what they leave out, is becoming increasingly important when building diversified portfolios.
Index investing remains one of the most important innovations in modern portfolio management. But no index is neutral. Every benchmark reflects a methodology, and every methodology creates biases.
For advisers and investors alike, it’s worth looking beneath the surface.
Because the most important diversification question today isn’t whether you invest in Asia.
It’s which version of Asia your portfolio actually owns.
Cameron Robertson is Portfolio Manager of the Platinum Asia Fund and has specialised in investing across Asia for more than 15 years. To find out more about the Platinum Asia Fund Complex ETF (ASX:PAXX) and how the team invests beyond traditional benchmarks, visit Platinum.com.au.
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