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Fund Spotlight – Matthews Asian Growth & Income (MACSX)

Value investors watching Asia slide and thinking of buying on the cheap have several funds to consider, one of which is Matthews Asian Growth & Income (MUTF:MACSX).

Shares of MACSX lost more than 7 percent in the past month as emerging markets take it on the chin. The fund has suffered for exposing itself to Japan and Australia, each at about 9 percent of assets as of May 31. Neither country is in the benchmark index, the MSCI All Country Asia ex Japan Index. Japan has taken a beating as investors sour on Abenomics, Japan's shot at generating 2 percent inflation after 20 years of disinflation and deflation. Australia has been hurt by a slowdown in China's infrastructure development, part of the nation's rebalancing towards a consumer economy.

As expected, the most exposure comes from Greater China, with 28 percent in China and Hong Kong (as of March 31) and 16 percent in Singapore. Taiwan clocked in at nearly 4 percent, almost as much as India. Compared to the benchmark, the fund was underweight China, Taiwan, South Korea and India, with much of that reduced exposure going into Singapore, Australia and Japan.

The fund leans towards large caps, with nearly 77 percent of assets in stocks with market capitalizations above $5 billion. However, that was about 9 percent less than the benchmark, made up by larger exposure in mid caps and small caps. The fund had 83 percent of assets in equities and ADRs as of March 31, followed by 11 percent in convertible bonds and 3 percent in preferred shares.

Investors already committed to Asian exposure, but looking for slightly higher income, should consider the fund. For other investors, the big question is whether the run in emerging markets is over for now. Prices have come down, but it could be the start of a multi-year under performance relative to the U.S.

MACSX has an Buy rating in the Fidelity Independent Adviser Newsletter and a Power Index Rating of 89. If you would like more information on this unique proprietary rating system we employ in our newsletter, please call us at (800) 548-3797 and we would be happy to speak with you.

Historical Performance (as of 6/12/13)

 

YTD

1 year

3 years*

5 years*

MACSX

1.23

21.52

10.85

6.93

+/- MSCI EAFE

-6.19

-7.23

0.01

7.36

+/- Category (PJ)

3.53

6.56

4.61

4.73

Click to enlarge

*3 and 5 Year Returns are annualized. Past performance is no assurance of future results.

Top Ten Holdings (as of 3/31/13)

Top 10 holdings account for 27% of assets.

Singapore Technologies Engineering Ltd.

AIA Group Ltd.
HSBC Holdings PLC ADR
Jardine Matheson Holdings Ltd.
Keppel Corp Ltd
Ascendas Real Estate Inv Trust
Japan Real Estate Investment Corp
Hisamitsu Pharmaceutical Co. Inc.
United Overseas Bank Ltd.
Orica Ltd.
Click to enlarge

Operations and Expenses

MACSX has an annual holdings turnover of 17.4%. It has a no load, a short-term trading fee of 2% for shares held less than 90 days, and an expense ratio of 1.11%. The minimum initial investment for individuals is $2,500.

Management

MACSX has been managed by Robert Horrocks since April 2009. Horricks earned a PhD from Leeds University.

Fidelity Independent Adviser's Power Rankings

Power Index: 89
Power Trend: Negative
Recommendation: Buy

(Sources: Morningstar, matthewsasia.com)