Matthews India Active ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy merits an Above Average Process Pillar rating. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People, Process and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Ritchie Bros. Auctioneers

This strategy’s Process rating is downgraded to Above Average from High for personnel and other reasons.
This strategy employs the same quality-growth approach as Matthews Pacific Tiger MAPTX and several of its other siblings. Lead manager Peeyush Mittal and comanager Swagato Ghosh pursue strong and durable growers selling at moderate valuations. They readily consider lesser-known and smaller-cap stocks and pay particular attention to firms that will benefit from the region's rising income levels. They are also willing to load up on sectors and industries packed with compelling growers and to go light on or ignore areas where attractive opportunities are scarce. As is the case at the other growth-oriented strategies from Matthews, the end result here is a portfolio that stands out from most Morningstar Category peers and relevant benchmarks. 
All that is sound as well as distinctive. But the December 2023 investment-team departures and other changes—plus the many prior ones—call into question whether the team has the overall resources, stability, and continuity to implement any process in an excellent fashion. The process has earned generally mixed to disappointing results during the past several years at most of the Matthews offerings that employ it. And while the firm’s leaders and portfolio managers recently indicated that they’re striving to improve position sizing, portfolio construction, and active-risk management across the firm's lineup—which makes sense—it’s early days for their efforts.

Note: The Process Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a vehicle that follows a given strategy (as codified by Morningstar’s StrategyID data point) Morningstar maps the covered vehicle’s Process Pillar to any other uncovered vehicles that follow the same strategy (that is, share the same StrategyID). This ensures that the analyst’s view is leveraged whenever available and promotes consistency when assigning Process Pillar ratings to vehicles that follow the same strategy.

Above Average

Process

Matthews continues to suffer from too much portfolio-manager and analyst turnover, and the recent changes here and elsewhere at the firm drop this fund’s People rating to Average from Above Average.
Investment-team departures and changes have been a problem at the firm for years. Most recently, three portfolio managers and an analyst were dismissed in December, and many of the remaining team members took on new roles at the same time. Some of those changes affected this strategy. Sharat Shroff was dismissed from his comanager role here as well as from his co-lead manager role on Matthews Pacific Tiger MAPTX and left the firm. Peeyush Mittal remains the lead manager here, but he also took on a new comanager role on Matthews Pacific Tiger (and continues to serve as a comanager on two other funds). Swagato Ghosh was promoted to comanager from analyst on this strategy. 
Shroff had served as a comanager or lead manager on this fund for 17.5 years, so his abrupt departure is disquieting. Mittal spent roughly three years as an analyst and 18 months as a comanager before he took the helm in October 2019—and he had significant experience as an India analyst when he joined Matthews in 2015—but his tenure as lead manager is still fairly short, and this fund has posted underwhelming results over his time in charge. Ghosh worked as an India analyst before he joined Matthews and has 11 years of relevant experience, but he only joined the firm and began working with Mittal as an analyst in 2022, and he has no prior portfolio manager experience.

Note: The People Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a vehicle that follows a given strategy (as codified by Morningstar’s StrategyID data point), Morningstar maps the covered vehicle’s People Pillar ratings to any other uncovered vehicles that follow the same strategy (that is, share the same StrategyID). This ensures that the analyst’s view is leveraged whenever available and promotes consistency when assigning People Pillar ratings to vehicles that follow the same strategy.

Average

People

Matthews International Capital Management still has strengths, but a transforming strategy roster, personnel turnover, and a big decline in assets warrant a drop of its Parent rating to Average from Above Average.

Matthews has a long history of success with funds that focus on Asian equities, but it has overhauled its strategy roster in recent years. Since early 2020, it has liquidated three funds, merged another away, launched its first diversified emerging-markets fund, and converted two of its Asia funds into diversified emerging-markets offerings. It also has opened four active exchange-traded funds in the past 12 months. That's a lot of change, and the firm is unproven in the diversified emerging-markets arena, though the fact that Asian stocks dominate the emerging-markets universe is grounds for optimism.
 
Matthews still has 30 individuals—excluding portfolio strategists and traders—on its investment team, and many are seasoned and skilled. But the firm has lost quite a few managers and analysts since the start of 2020, and the investment team is much smaller than it was. Further, its management team has had notable departures and retirements, such as former CEO William Hackett. Fundholders have pulled sizable amounts from Matthews' funds in recent years, and assets under management fell to $12 billion as of May 31, 2023, from $27 billion as of Dec. 31, 2019.

Parent

Matthews India Active ETF

INDE actively selects Indian companies capable of sustainable growth based on fundamentals. The fund follows an all-cap strategy while implementing a fundamental bottom-up approach.

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Matthews Asia has launched five new actively managed emerging market ETFs on the New York Stock Exchange. The firm's full suite of transparent active ETF strategies will be similar to its existing mutual funds.

Matthews Asia Launches 5 New Active Emerging Market ETFs

SAN FRANCISCO, Sept. 22, 2023 (GLOBE NEWSWIRE) -- Matthews further enhanced its Emerging Markets leadership in Active ETFs today with the launch of five new actively managed exchange-traded funds (ETFs) on the New York Stock Exchange. Following the launch of its Active ETFs platform last year, this will bring the firm's suite of Emerging Market and Asia-focused ETFs to 10.

News for Matthews India Active ETF ETF (INDE)