HEAD-TO-HEAD: Jupiter vs Matthews Asia

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Investment strategy

Both Jupiter and Matthews Asia funds fall into FE’s China equity category. Although they are benchmarked to the same index, the MSCI China, their strategies differ largely from each other.

The Jupiter fund is a multi-cap strategy that seeks to invest in companies positioned to benefit from the long-term growth characteristics of their sectors. The manager aims to identify long-term trends related to important developments in Greater China’s economy.

The Matthews Asia fund favours smaller companies with growth in dividend payouts, according to Ng.

“The Jupiter team generates ideas by identifying the benefits of the structural changes in the country. It is followed by an evaluation on whether the potential upside is yet to be priced in the stock,” he explained, adding that the strategy can uncover the names that are generally overlooked by the market.

In addition, the management team screens the investment universe for trading volume to ensure the liquidity of particular stocks. Meeting with the companies on a regular basis is also part of the process, Ng said.

Each holding in the fund tends to be a maximum of 5% of the portfolio, which can help lower concentration risk, Ng added.

At the end of July, the Jupiter fund had 41 holdings, compared to Matthews Asia’s 57 stocks.

Turning to the Matthews Asia product, the team selects stocks by analyzing the ability to pay dividends, management’s willingness in giving out dividends and dividend growth.

In the investible universe, the stocks generally must have a payout history of 2%, but this is not a hard constraint. Ng said some individual names in the fund currently do not have any dividend history, for example the top holding, Tencent.

“In addition to dividend-paying stocks, the fund managers have bets on some companies that they believe have the ability to award shareholders over a longer time horizon,” he added.

Therefore, the Matthews Asia strategy looks for gains from income as well as capital appreciation of a stock. The managers have a preference for small-caps (market cap <$3bn), which accounted for 50% of the portfolio at the end of July.

In terms of geographic allocation, the Jupiter fund gives investors exposure to Hong Kong, US, and Taiwan-listed equities, which is similar to a Greater China approach, according to Ng.

By comparison, the Matthews Asia portfolio does not hold any Taiwan companies but it invests about 30% of the portfolio in Hong Kong-listed companies..

Sector allocation

Source: Fund and index factsheets

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