HEAD-TO-HEAD: JP Morgan vs Matthews Asia

123456

Investment strategy

The funds deploy different investment strategies but adopt the same reference benchmark, the MSCI AC Asia Pacific Index.

The JP Morgan fund primarily looks for capital appreciation, Ng said. The managers categorise the investible universe into two major parts — long-term compounders and fast-growing companies.

The stocks identified as long-term compounders take up around 60% of the fund’s assets and are expected to bring consistent returns over the long-term. The manager typically holds the stocks for at least three years, Ng explained.

The second part, fast-growing companies, is comprised of stocks with a comparatively lower quality that nonetheless are expected to rise during shorter-term market moves, Ng said. This group of stocks rarely account for more than 40% of the portfolio.

The managers limit the holdings to 70 stocks and the portfolio currently has 60 holdings, according to Ng.

The managers also leverage the in-house equity research for specific countries. They study the financial strength of a company as well as the dynamics of the industry it belongs to.

Their assessment includes projected return-on-equity, competitive edge, management track record and company transparency. It results in a five-year forecast.

Turning to the Matthews Asia fund, it has employed a dividend strategy. Ng said the fund managers do not invest purely in dividend-paying companies, but instead aim to deliver a total return to investors.

The managers start with a quantitative screening to look for stocks with a recent history of dividend payouts and other financial information. The company’s dividend data has to meet certain criteria, Ng said.

“An investible company for Matthews Asia should maintain a sustainable dividend payout and dividend growth.

“The managers also look into the company’s ability to pay the dividend, the management’s willingness to reward investors, and the long-term prospect of a dividend increase,” he added.

Ng said the fund’s current yield of 2.89% is not high for a dividend strategy. But since the managers also invest in companies that could potentially start paying dividends or have a track record of increasing dividends, he believes the product rewards investors at a reasonable level.

Many Asian businesses are controlled by families who hold the majority of issued shares, which may give them incentive to pay dividends, Ng added.

Moreover, the Matthews Asia fund is more biased to small- and mid-caps than the JP Morgan fund. At the end of June, the fund held 18.7% of assets in companies with a market capitalisation under $3bn, compared to 2% in the benchmark.

In terms of sector allocation, the Matthews Asia fund is overweighting the defensive sectors, such as consumer staples, telecom and utilities. By comparison, the JP Morgan fund is more biased to companies with larger growth potential, such as information technology and healthcare.

Sector allocation

Geographical allocation

Source: fund and index factsheets

123456