4 / 5 Stars
5 5 5 5 2
Zacks Investment Research
1 (Strong Buy)
Standard & Poor's
5 / 5 Stars
#1 in Diversified Pacific/Asia
U.S. News evaluated 11 Diversified Pacific/Asia Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.
The fund has returned 16.56 percent over the past year and 9.04 percent over the past three years.
|Trailing Returns||Updated 11.30.2013|
|Year to date||12.9%|
|3 Years (Annualized)||9.0%|
|5 Years (Annualized)||20.0%|
|10 Years (Annualized)||N/A|
When most investors think of Asia, they think of emerging markets, high volatility, and risk. However, companies in the region are beginning to generate larger cash flows, a trend which has in many cases translated into more stable enterprises and healthier dividends for investors. The Matthews Asia Dividend fund—as its name suggests—seeks out firms that pay dividends, especially those with a history of increasing dividend payments.
As of December 04, 2013, the fund has assets totaling almost $5.88 billion invested in 58 different holdings. Its portfolio consists of dividend-paying stocks of companies primarily in the Asia Pacific region.
While the fund primarily invests in developed and emerging Asia, management picked up Australian insurance firm QBE in late 2010. Lead fund manager Jesper Madsen says that although the company’s earnings have lagged in recent months due to the global economic climate, the company is still a good match for the fund’s long-term investment horizons. Madsen says insurance companies such as QBE tend to do better in rising-rate environments because they earn more interest on the “float”—money that’s temporarily on hand when premium payments come in sooner than expected. “At the end of the day, if you think perhaps interest rates will normalize, perhaps inflation will eventually come back into the system, then this is a company that would benefit from a change in that respect,” Madsen says. “But it does mean that you have to stick your head out in these instances.”
Madsen says he’ll continue to seek out opportunities in small- and mid-cap companies. “As bottom-up investors, [we] still have the chance to go out and find somewhat undiscovered or under-covered companies.” The rationale behind that strategy is that while small- and mid-cap companies might pay lower dividends today relative to a large-cap company, those companies—and their dividends—tend to grow faster.
As of the end of the first quarter, the fund’s three-year trailing returns put it in the top 1 percent among similar funds. The fund has returned 16.56 percent over the past year and 9.04 percent over the past three years.
Management focuses on finding dividend-paying companies in Asia, especially those that have a history of increasing dividend payments. Companies that pay dividends are usually more established and less likely to have major price fluctuations, management says, which helps curb the volatility often associated with Asian markets.
Fund managers Jesper Madsen and Andrew Foster have a lot of flexibility to seek opportunities across market capitalizations. In contrast with its benchmark, the MSCI All Country Asia Pacific Index, the Matthews Asia Dividend fund has a greater share of mid- and small-cap funds—almost 50 percent of total assets were held in shares of such firms as of late 2010, versus about 12 percent for the benchmark. “In my mind, this fund is competing against U.S. dividend and income-equity focused strategies,” Madsen says.
Role in Portfolio
Morningstar calls this fund a specialty investment.
Jesper Madsen (lead manager) and Andrew Foster (co-manager) have managed the fund since its 2006 inception. Prior to joining Matthews Asia in 2004, Madsen worked as a research analyst for Charter Equity Research. Madsen has also managed Matthews China Dividend fund since its 2009 inception. Foster manages the firm’s Asian Growth and Income fund and also co-manages the Matthews India fund.
Matthews Asia Dividend Fund has an expense ratio of 1.09 percent.
Emerging Asian markets can be more volatile than developed markets.