(PUB) Morningstar FundInvestor

9

Morningstar FundInvestor

July 2 013

have been quite involved with the fund since the 1990 s, are seasoned and skilled emerging-markets experts and have a strong support team. They follow a sound growth strategy, and though they’re not quite as bold as their predecessor, they’re still willing to pile into countries and sectors that are packed with compelling growers. They’ve used this approach to earn superior results in rallies, and this fund has posted a 17 . 8% annualized gain from their April 2009 takeover through June 14 , while its typical peer has earned a 16 . 1% annualized return over the period. This fund also has been more volatile than the group norm on their watch, though. Emerging-Asia Plays Regional emerging-markets funds tend to be concen- trated by sector and stock as well as by country—so they are more vulnerable to blowups in particular areas. That said, the investment universe in emerging Asia is much larger and more varied than those in Latin America and other developing regions, and there are some good Pacific/Asia ex-Japan funds. Matthews Asian Growth & Income MACSX is a terrific option for those seeking pure emerging- Asia exposure without taking on a lot of risk. It has a big expense edge over most of its rivals. It’s run by two talented Asia specialists who work with an exceptional team. The managers focus on fairly conservative securities—dividend-paying equities,

preferred stocks, and convertible bonds—while scouring the region for opportunities and letting coun- try and sector weights fall where they may. Because of the managers’ reserved tastes, this fund has held up much better than most of its peers in sell-offs and has been far less volatile than all of its rivals over time. And thanks to the managers’ execution and willingness to go their own way, this fund has fared well enough in choppy markets and moderate rallies to earn attractive long-term returns, though it has tended to disappoint in go-go rallies. It also invests small amounts in Japan, so it’s not a pure emerging- Asia offering. Its upside potential is clear. From manager Anh Lu’s arrival on April 14 , 2009 , through June 14 , 2013 , the fund has posted a 21 . 1% annualized gain, while the average Pacific/Asia ex-Japan fund has posted a 15 . 3% annualized return. Lu uses the same sound growth strategy—and works with the same sup- port team—that has paid off at T. Rowe Price Emerg- ing Markets Stock. And this fund has a low expense ratio, which gives it an ongoing edge. But Lu readily loads up on countries and sectors that are full of superior growers—though she is not as bold as her predecessor—and this fund has been more volatile Investors seeking a bolder play on the region should check out T. Rowe Price New Asia PRASX .

The 10-year trailing returns for emerging-markets funds are enticing, but they mask enormous year-to-year and country-to- country volatility. Be prepared for a wild ride, especially if you buy a regional or single-country fund.

than its typical rival on her watch. œ Contact Bill Rocco at bill.rocco@morningstar.com

Yearly Returns for Emerging Markets

Total Ret YTD % (Daily)

Total Ret Ann.10 Yr % (Daily)

Annual Ret % 2002

Annual Ret % 2003

Annual Ret % 2004

Annual Ret % 2005

Annual Ret % 2006

Annual Ret % 2007

Annual Ret % 2008

Annual Ret % 2009

Annual Ret % 2010

Annual Ret % 2011

Annual Ret % 2012

Name

MSCI Indonesia NR

41.87

76.53

50.64

15.11

73.78

54.17

-56.48 126.24

33.93

6.00

4.65

4.32

24.86

MSCI Turkey NR

-35.83 125.30

41.44

56.06

-7.21

74.09

-62.29

97.51

20.81

-35.41

64.21

-0.38

20.21

MSCI Brazil NR

-30.65 115.01

35.48

56.45

45.30

79.56

-56.21 128.06

6.54

-21.85

0.05

-13.73

20.04

MSCI Thailand NR

27.26 143.51

-1.24

8.72

11.11

46.05

-48.48

76.57

55.71

-2.72

34.53

0.87

19.18

MSCI Mexico NR

-13.31

32.81

48.32

49.11

41.44

12.15

-42.94

56.63

27.61

-12.11

29.06

-6.79

17.36

MSCI India NR

7.90

78.35

19.11

37.57

51.00

73.11

-64.63 102.81

20.95

-37.17

25.97

-5.93

17.12

MSCI China NR

-14.05

87.57

1.89

19.77

82.87

66.24

-50.83

62.29

4.63

-18.41

22.75

-9.35

15.87

MSCI Korea NR

8.29

35.02

22.06

56.97

12.64

31.85

-55.29

71.35

26.74

-12.00

21.18

-11.49

12.40

MSCI Russia NR

15.43

75.08

5.46

73.12

55.60

24.50

-73.88 104.22

19.07

-19.55

13.66

-10.44

9.13

MSCI Taiwan NR

-24.69

41.91

8.99

6.38

19.97

8.38

-46.45

79.21

21.84

-20.89

16.68

0.44

7.27

Data as of June 17, 2013.