Investing in America:

Removing U.S. companies
with high China risks
from your
retirement investments





Key points

- The vast majority of retirement savers in the US are unknowingly investing significant amounts of money in companies exposed to risks of doing business in economies of authoritarian regimes.

- 75% of the S&P 500 Index (market cap value) indirectly benefits authoritarian regimes such as the People’s Republic of China. 

- At FWI, we believe every investor should have the right to select or avoid investments in such countries or regions, for both ethical and risk-management purposes.

- As the first investment strategy dedicated to mitigating geopolitical risks within a US focused investment strategy, FWI offers the Free World Efficient Growth Portfolio (FWEG).


Where did your RETIREMENT FUNDS go?


Direct Investment into China

Foreign Direct Investment (FDI) in China has plummeted to its lowest level in 30 years. According to China's State Administration of Foreign Exchange (SAFE), inbound investment from foreign companies reached only $33 billion in 2023—a staggering 90% decline from 2021, marking the lowest level since 1993. The exodus of corporations from China reflects the increasingly challenging economic environment and the intensifying US-China rivalry.


Indirect Investment into China

Despite Chinese economic slowdown and escalating geopolitical risks, FWI Due Diligence identified 75% of the S&P 500 Index (market cap value) indirectly benefits authoritarian regimes, particularly the People's Republic of China (PRC) largely due to:

- Corporates' Supply Chain
- Revenue Exposure
- Global Companies' Attitude Towards China


Why do you need to AVOID your investment from China?

Chinese Economic Red Flags


China is in the midst of a profound economic crisis -
 In 2023, the country’s debt-to-GDP ratio reached an unprecedented 288%, while its Consumer Confidence Index (CCI) plunged to a near-historical low of 86. The Chinese economic malaise is hitting home for US companies. for example, Starbucks, which played a key role in fostering China’s coffee culture over the past 25 years, saw a 14% decline in sales from the Chinese market. As of September 2024, the iShares MSCI China exchange-traded fund has also lost half its value since March 2021.

Unfortunately, many U.S. investors' retirement savings are tied up in China, due to the significant exposure of American companies to the Chinese market. This leaves ordinary investors vulnerable to the escalating economic and investment risks associated with China.

Rising Political Risks


Most asset managers and multinational corporations (MNCs) have historically overlooked geopolitical risks in their investment decisions, leading to stock valuations that fail to account for specific country-investment risks. For example, BlackRock, the largest asset manager in the world, lost $17 billion due to Russian exposure immediately following the country's invasion of Ukraine

Now, what about China? Under the one-party dictatorship of the People’s Republic of China (PRC), global supply chains and multinational corporations have already faced significant disruptions during the "Zero-COVID Policy". The continuous economic downturns in China have also shaken the legitimacy of the Chinese Communist Party (CCP), making the country more vulnerable to global sanctions, especially amid precarious U.S.-China relations and geopolitical instability in the South China Sea and Taiwan.

With the U.S.-China trade deficit reaching $279.4 billion in 2023, America's significant economic exposure to China means that any China-induced geopolitical instability could severely impact the global economy and ordinary investors' retirement savings. In short, geopolitical risks—specifically "China Risk"—are becoming a critical factor for investors who seek to mitigate risk and ensure safer, more sustainable returns.


Why matters to YOU?

S&P 500 concentration is at its highest level in over 30 years. As of March 2024, with the 10 largest US stocks account for 33% of the S&P 500 index’s market value. As a result, investors' exposure to "China Risk" is greater than ever, as these top companies often have significant investments in China.

This means that any outbreak of geopolitical tensions, or worse, military conflict, could have catastrophic effects on the global economy—and, ultimately, on individual retirement savings held in investment portfolios like 401(k)s and IRAs.


How to mitigate China Risk?


At FWI, we believe every investor should have the freedom of choice — the right to select or avoid investments in specific countries or regions based on their preferences.

As the first ethical, US equity focused investment strategy dedicated to genuinely mitigating geopolitical risks—particularly "China Risk"—FWI offers the Free World Efficient Growth (FWEG) portfolio. This thoughtfully curated portfolio consists of companies with no significant presence or interests in repressive regimes. Our goal is to provide investors with growth opportunities and strong risk-adjusted returns, all while adhering to the highest ethical investment standards. At the mean time, FWEG is constructed to systematically and proactively address the risk of loss. The portfolio will ALWAYS:

·    Avoid over-valued companies - You don't want mean reversion working against you. The hottest companies very often become the coldest in a recession. 
·    Avoid over-leveraged companies - Debt is a double-edged sword that tends to turn on its wielder in a recession.
·    Avoid over-concentration - FWEG is equally-weighted, diversifying risk across companies and industries.

The FWEG portfolio gained 32.78% over the twelve months ending September 30, 2024. Since inception in June 2022, its average annualized return was 14.61%. (Net Performance).


How to Achieve The Best of Both Worlds -
Good Return and Avoiding China?


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