Matthews Asia Growth Fund

Scorecard
4 / 5 Stars
Lipper
5 5 3 4 4
Zacks Investment Research
4 (Sell)
Standard & Poor's
4 / 5 Stars
TheStreet.com
D- (Sell)

#3 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.

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Performance

The fund has returned 11.48 percent over the past year, 8.04 percent over the past three years, and 14.02 percent over the past five years.

Trailing Returns Updated 06.30.2014
Year to date 3.8%
1 Year 11.5%
3 Years (Annualized) 8.0%
5 Years (Annualized) 14.0%
10 Years (Annualized) 10.1%

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Summary

Good ideas come in smaller packages, at least for this fund. While similar funds stick mostly to the large-cap names, the managers of this fund are willing to venture into small- and mid-cap territory.

As of July 03, 2014, the fund has assets totaling almost $821.93 million invested in 70 different holdings. Its portfolio consists of small- to giant-cap stocks of companies in the Asia/Pacific region.

During the 2008 financial crisis, fund managers Taizo Ishida and Sharat Shroff cut the fund’s holdings by 30 percent, paring down the fund from about 65 names to 50 names. According to Ishida, selling lower conviction names and redeploying those assets to high conviction names with cheaper valuations helped the fund contain losses during the downturn.  Since then, they’ve focused on building exposure to small- and mid-cap names, which amounted to more than 30 percent of total assets as of the end of 2010, above the 26 percent held, on average, by similar funds.

In March 2010, Ishida picked up Taiwanese tech company HTC, which manufactures smart phones. “[HTC] is doing well in the U.S., Europe, and really across the globe,” Ishida says. “iPhone is so big, but there is room for other smart phones to grow.” Chinese tourism company Ctrip is another mid-cap name Ishida likes. It’s also one of the fund’s largest position as of the end of 2010. “If you go to China, it’s a no-brainer,” Ishida says. “People travel like crazy—especially businesspeople.”

Earlier in 2010, Ishida also picked up three companies headquartered in Vietnam, a unique emerging market he says is like a “miniature China.” “All the stocks are very, very cheap right now,” Ishida says. “It’s a communist regime, yet you still have private enterprise and they are doing well.” The fund has returned 11.48 percent over the past year and 8.04 percent over the past three years.

Current lead manager Taizo Ishida and comanager Sharat Shroff took over the fund in 2007 after two years of disappointing returns. But as of March, the fund’s five-year trailing returns place it in the top 1 percent of similar funds, and its one- and three-year trailing returns are in the top 10 percent. The fund has returned 14.02 percent over the past five years.

Investment Strategy

Lead manager Taizo Ishida describes the Matthews Asia Pacific fund as a go-anywhere (in the Asia/Pacific region), all-cap growth fund, that is “agnostic to index, industry and country.” The fund is also geographically diverse. “I’m not trying to allocate the money according to any particular country or industry. I just don’t do that,” Ishida says. Instead, Ishida builds the fund’s portfolio from the bottom up and looks at prospective stocks one by one. “I really just say ‘Where can we get the most benefit in this region?’ and ‘Where is the most robust growth in this whole region?’”

Role in Portfolio

Morningstar calls this fund a specialty investment.

Management

Lead manager Taizo Ishida has overseen the fund with co-manager Sharat Shroff since 2007. Prior to joining Matthews in 2006, Ishida served as vice president and portfolio manager at Wellington Management Company. According to Morningstar, Ishida has focused on Asian and other foreign equities since 1987 and also runs Matthews’ Japan fund. Shroff has 10 years of experience and also runs the firm’s India fund. Before coming to Matthews in 2005, Shroff worked at Morgan Stanley as an Equity Research Associate. 

Fees

Matthews Asia Growth Fund has an expense ratio of 1.12 percent.

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Risk

The fund’s exposure to emerging markets might increase volatility.

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See Also:

Top Matthews Asia Funds Funds