Is Matthews China Small Companies Investor (MCSMX) a Strong Mutual Fund Pick Right Now?

If you're looking for a Pacific Rim - Equity fund category, then a potential option is Matthews China Small Companies Investor (MCSMX). MCSMX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.


MCSMX is one of many Pacific Rim - Equity funds to choose from. Pacific Rim - Equity mutual funds typically invest in companies throughout the dominant export-focused markets of Hong Kong, Singapore, Taiwan, and Korea. Since Japan mutual funds are already popular in their own right, these Pacific funds will usually invest less than 10% of their assets in Japanese companies.

History of Fund/Manager

MCSMX finds itself in the Matthews Asia family, based out of San Francisco, CA. Since Matthews China Small Companies Investor made its debut in May of 2011, MCSMX has garnered more than $46.21 million in assets. Tiffany Hsiao is the fund's current manager and has held that role since July of 2015.


Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 7.39%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 12.58%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. MCSMX's standard deviation over the past three years is 18.85% compared to the category average of 13.23%. The fund's standard deviation over the past 5 years is 20.23% compared to the category average of 14.09%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. MCSMX has a 5-year beta of 0.96, which means it is likely to be less volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. Over the past 5 years, the fund has a negative alpha of -0.35. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.


For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, MCSMX is a no load fund. It has an expense ratio of 1.50% compared to the category average of 1.35%. Looking at the fund from a cost perspective, MCSMX is actually more expensive than its peers.

This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $100.

Bottom Line

Overall, Matthews China Small Companies Investor ( MCSMX ) has a neutral Zacks Mutual Fund rank, strong performance, worse downside risk, and higher fees compared to its peers.

For additional information on this product, or to compare it to other mutual funds in the Pacific Rim - Equity, make sure to go to for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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