Is Matthews China Investor (MCHFX) a Strong Mutual Fund Pick Right Now?

If you're looking for a China - Equity fund category, then a potential option is Matthews China Investor (MCHFX). MCHFX possesses a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.

Objective

MCHFX is one of many China - Equity mutual funds to choose from. These funds focus their investments almost exclusively on stocks in China, Taiwan, and Hong Kong. We tend to associate the Chinese economy with vast export-focused manufacturing, and although this is still important, China is increasingly catering to its booming middle class. If this approach sounds appealing to you, MCHFX could be the way to go.

History of Fund/Manager

MCHFX finds itself in the Matthews Asia family, based out of San Francisco, CA. Since Matthews China Investor made its debut in February of 1998, MCHFX has garnered more than $282.29 million in assets. The fund's current manager, Winnie Chwang, has been in charge of the fund since April of 2014.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of -3.85%, and it sits in the middle third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 7.51%, which places it in the middle third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. MCHFX's standard deviation over the past three years is 24.33% compared to the category average of 16.38%. The standard deviation of the fund over the past 5 years is 29.93% compared to the category average of 19.41%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 0.4, the fund is likely to be less volatile than the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. MCHFX has generated a negative alpha over the past five years of -7.38, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, MCHFX is a no load fund. It has an expense ratio of 1.25% compared to the category average of 1.13%. From a cost perspective, MCHFX is actually more expensive than its peers.

Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $100.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, even with its comparatively similar performance, worse downside risk, and higher fees, Matthews China Investor ( MCHFX ) has a neutral Zacks Mutual Fund rank, and therefore looks a somewhat average choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the China - Equity, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.

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This article originally published on Zacks Investment Research (zacks.com).

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