A Less-Volatile Way to Invest in Asia

Fund Watch

A Less-Volatile Way to Invest in Asia

Favoring Japan and avoiding India and China spared Matthews Asian Growth and Income some of the bloodbath in Asian markets over the past 12 months.


What’s not in a mutual fund’s portfolio can matter almost as much as what is. Matthews Asian Growth and Income (MACSX), for example, hasn’t owned Indian stocks lately and has been light on Chinese firms. Those were good moves: Most Asian markets posted double-digit declines over the past 12 months, and China and India were among the region’s worst performers. So although Matthews lost money over the period, it outpaced 95% of funds that focus on Asian stocks.

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Despite making what look like market calls on two of Asia’s biggest emerging nations, managers Robert Horrocks and Kenneth Lowe insist that they build their portfolio one company at a time. They continue to shun India (even after visiting the country recently to check out potential investments) because they say stocks there are too pricey. And they worry that China’s transition from an economy built in part around exports and infrastructure spending to an economy driven by consumers could lead to market instability.

Horrocks, who has been manager since 2009, and Lowe, who became co­manager in 2011, can invest in companies of any size based anywhere in Asia. At last word, they had 7% of the fund’s assets in Japanese stocks; shares in Japan Tobacco, the fund’s fifth-biggest holding at last word, climbed 10.4% over the past 12 months. Food and consumer stocks in other countries also buoyed performance. Vietnam Dairy Products soared 64%, and SkyCity Entertainment, a New Zealand casino and hotel company, rose 21.5%.


Matthews, a member of the Kiplinger 25, aims to provide a relatively stable way to participate in Asia’s growth. The managers favor high-quality firms that trade at value prices. To further reduce volatility, they invest in dividend-paying common stocks, preferred stocks and convertible bonds. “We want to build wealth in a way that will protect capital and mitigate volatility,” says Lowe. Over the past five years, Matthews bested the typical Asia stock fund by an average of 3.1 percentage points per year.