Matthews International Capital Management LLC is re-opening two of its Matthews Asia mutual funds, thanks to a combination of performance issues and outflows giving the funds fresh capacity to take on new money.
The five-star $3.1 billion Matthews Asian Growth and Income Fund and the five-star $316 million Matthews Asia Small Companies Fund are set to reopen to investors Jan. 4. The funds were closed about one year ago because they were growing too large for the portfolio managers to put new money to work effectively.
The Matthews Asian Growth and Income Fund is approximately $1 billion lighter now than it was when it closed Jan. 7 after a year-to-date return of nearly -13% and $582 million of outflows through the end of November, according to Morningstar Inc. The Matthews Asia Small Companies Fund has lost $150 million to outlfows, or about 31% of the $479 million in assets it had at the beginning of the year.
Even though the funds have struggled on an absolute basis, they've still performed well in a tough category, said Bill Rocco, a mutual fund analyst at Morningstar. The average Pacific/Asia ex-Japan stock fund is down 23% year-to-date, 10% worse than the growth-and-income fund, and 2% worse than the small-companies fund. The category has been hurt by fears of slowing growth in China and inflation throughout the rest of emerging Asia, Mr. Rocco said.
“The openings are good news for investors who want an Asia-focused fund, because now they have two more options,” Mr. Rocco said.
The Matthews Asian Growth and Income Fund focuses on dividend-paying stocks, preferred stocks and convertible bonds in the Asian market, all three of which tend to hold up relatively well in a volatile market, Mr. Rocco said. The fund did recently have a manager change that bears watching, he said.
Andrew Foster, the fund's lead portfolio manager since 2003, left Matthews in March to start his own investment company, Seafarer Capital Partners LLC.
Jesper Madsen, lead portfolio manager of the Matthews Asia Dividend Fund and the Matthews China Dividend Fund, took over as lead portfolio manager along with Mr. Horrocks, the fund's co-lead manager. “Madsen's a good manager, but there is possibly concern he may be stretched too thin with three funds, and it's something we're keeping an eye on,” Mr. Rocco said. Matthews recently added a co-manager to the fund, Kenneth Lowe, which helps alleviate some of the concerns, he added.
Victoria Odinotska, Matthews' spokeswoman, said the firm has also added an additional analyst to the Matthews Asian Growth and Income Fund. "Matthews continues to beef up the management of all of its funds," she said.
The Matthews Small Companies Fund invests in small-cap Asian companies. It was launched in September 2008, and its three-year annualized return of 28% places it second-best in the category.