HEAD-TO-HEAD: Fidelity versus Matthews Asia

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The Fidelity and Matthews Asia funds versus their benchmark indices and sector in Hong Kong. Source: FE Fundinfo. In US dollars, trailing three years.

Performance

Given that the Fidelity fund invests more in micro and small caps, , Daniels expects the fund to outperform its index during market rallies.

However, he expects the product to underperform during bear markets.

“During down markets, small-cap stocks tend not to perform well, given that their outlook becomes more uncertain. Large-cap companies perform better, as they have more access to capital and generally have stronger balance sheets,” he said.

The opposite is true for the Matthews Asia fund.

“During up markets, the Matthews Asia strategy might struggle a bit more just because it focuses more on stable businesses, which usually include consumer-oriented names that might not do well in market rallies.

“But during down markets it can provide more downside protection,” Daniels said.

Indeed, year-to-date, the Matthews Asia offering has performed better than the Fidelity fund as markets have become volatile. On the flipside, the Fidelity fund outperformed the Matthews strategy in 2019 when equity markets were up, Daniels noted.

Annual calendar performance

Source: FE Fundinfo. In US dollars.

In terms of volatility, Daniels expects the Fidelity fund to be more volatile than the Matthews Asia strategy due to higher small cap exposure.

Three-year annualised volatility

Source: FE Fundinfo

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