Morningstar

Matthews Asia Dividend Fund I USD Dis

Analyst Report
Morningstar's Take
|23/01/2024
by Robby Greengold
The myriad personnel changes over the past decade at Matthews International Capital Management weaken Matthews Asia Dividend’s investment case.

In recent weeks, the firm reshuffled the leadership of many of its strategies in the wake of their lackluster results and dismissed several of its portfolio managers. Other big organizational changes preceded it, including some directly affecting this strategy.

House-cleaning within an asset manager can be well warranted to put its strategies on better footing than before. Indeed, at around 2023’s start, the firm replaced the leadership of this Asia-Pacific-focused strategy in part because the portfolio had struggled to reliably provide above-index current income, limit the downside of its total returns, and temper their volatility—all among the strategy’s primary objectives.

The strategy is now in the hands of a management team that, for more than a decade, has guided Matthews Asian Growth & Income MICSX in a far more conservative way. It includes now-lead managers Robert Horrocks (one of Matthews Asia Dividend’s longtime comanagers and previously a lead manager) and Kenny Lowe. Sid Bhargava and Elli Lee are now listed comanagers.

To return the portfolio to its risk-averse roots, Lowe and Horrocks have mostly pivoted away from Vietnam stocks in favor of those from Hong Kong, Taiwan, and Japan. Its country and sector exposures now align fairly closely with the MSCI All Country Asia Pacific Index (the strategy's prospectus benchmark). The portfolio now offers greater exposure to yield (dividend yield plus share repurchases) and quality, according to Morningstar’s risk model. It has less exposure to growth companies and those with highly volatile stock prices.

But many of the firm’s changes in recent years have seemed the result of dithering rather than proactive deliberation. Some personnel departures have undoubtedly been losses to the firm. After a roughly five-year stretch of missteps, the firm is still working toward regaining its balance.
 
Morningstar Medalist Rating™This strategy is risk-averse once again, but the firm itself remains volatile.
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Morningstar Pillars
PeopleAverage
ParentAverage
ProcessAbove Average
 
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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