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

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Having trouble finding a China - Equity fund? Matthews China Fund (MCHFX) is a potential starting point. MCHFX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify MCHFX in the China - Equity category, an area that is rife with potential choices. China - Equity mutual funds almost exclusively target stocks throughout China, Taiwan, and Hong Kong. China has changed drastically over the years, and even though we still associate the country's economy with export-focused manufacturing, it now focuses more than ever on its middle class. If you like the sounds of this investment method, then MCHFX could worth a closer look for your portfolio.

History of Fund/Manager

MCHFX finds itself in the Matthews Asia family, based out of San Francisco, CA. The Matthews China Fund made its debut in February of 1998 and MCHFX has managed to accumulate roughly $718.94 million in assets, as of the most recently available information. The fund is currently managed by Andrew Mattock who has been in charge of the fund since April of 2015.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 10.36%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 18.99%, which places it in the top third during this time-frame.

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. Compared to the category average of 14.11%, the standard deviation of MCHFX over the past three years is 21.36%. The fund's standard deviation over the past 5 years is 22.43% compared to the category average of 15.08%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In MCHFX's case, the fund lost 60.04% in the most recent bear market and outperformed its peer group by 5%. These results could imply that the fund is a better choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 1.28, so it is likely going to be more volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. The fund has produced a negative alpha over the past 5 years of -2.42, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, MCHFX is a no load fund. It has an expense ratio of 1.10% compared to the category average of 1.62%. Looking at the fund from a cost perspective, MCHFX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment needs to be at $100.

Bottom Line

Overall, Matthews China Fund ( MCHFX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

Don't stop here for your research on China - Equity funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare MCHFX to its peers as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.

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