Matthews Emerging Markets Ex Chn Act 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 sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in liquidity exposure and an overweight in quality exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a high quality exposure is rooted in holding stocks that are consistently profitable, growing, and have solid balance sheets. 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 Pillar 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

Despegar.com

Fed Inter Mun In Fd Shs of Benef.Interest

DNP Select Income Fund Inc

Freeport-McMoRan

Credicorp

WisdomTree Continuous Commodity Index Fund

Associated Capital Group

MercadoLibre

Nu Holdings

Globant

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Matthews Emerging Markets Ex Chn Act ETF earns an Above Average Process Pillar rating. 

The most important driver of the rating is its parent firm's superior long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.7 stars. The parent firm's five-year risk-adjusted success ratio of 57% also bolsters the rating. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Their relatively high success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the process is limited by the parent firm's five-year retention rate of 50%, which suggests it could do more to retain its portfolio managers.

 This strategy tends to hold smaller, more growth-oriented companies than its average peer in the Diversified Emerging Mkts Morningstar Category. Looking at additional factor exposure, this strategy consistently held some companies with relatively lower trading volume compared with Morningstar Category peers in the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy also has had a position favoring high-quality stocks in recent years, which could contribute to higher downside risk protection. Though it may trail peers during an economic boom, this orientation contributes to helping it weather periods of economic stress better. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. Furthermore, this strategy has leaned toward low-yield stocks over recent years, holding fewer companies with high dividend or buyback yields. Returning capital to shareholders often is not the highest priority of such businesses. The shares of such companies can deliver strong returns if they fulfill their growth projections, but they also carry more risk. In recent months, the strategy also had less Yield factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in technology and basic materials relative to the category average by 6.5 and 6.2 percentage points, respectively. The sectors with low exposure compared to category peers are communication services and consumer cyclical, underweight the average by 8.0 and 3.4 percentage points of assets, respectively. The portfolio is composed of 59 holdings and is relatively top-heavy. Of the strategy's assets, 35.9% are concentrated within the top 10 holdings, as opposed to the typical peer's 25.4%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 29% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

Matthews Emerging Markets Ex Chn Act ETF earns an Average People Pillar rating. The team is backed by the longest-tenured manager Alex Zarechnak, who has two years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.0 stars, reflecting average risk-adjusted performance versus category peers. Although the team size is solid, together they are largely unproven. With three additional supporting listed managers, the team averages four years of listed portfolio management experience. As a team, they manage two investment vehicles together, with a Bronze asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha in aggregate. The team has been a revolving door, with higher-than-average portfolio-manager turnover. The most recent documented departure was three months ago. High team turnover can hinder the effectiveness of a strategy's investment process. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

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 Emerging Markets Ex China Active ETF

MEMX is an actively managed fund that invests in companies from emerging markets, excluding China, considered to have sustainable growth potential.

BNY Mellon Concentrated International ETF

ALPS International Sector Dividend Dogs ETF

Columbia EM Core ex-China ETF

U.S. investors have so many options to choose from in the domestic equities landscape. From big tech to disruptive tech to utilities and healthcare companies, there's something for all types of investors.

What You're Missing in Foreign Equities

iShares Emerging Markets Dividend ETF

Pacer Emerging Markets Cash Cows 100 ETF

iShares MSCI Emerging Markets ETF

Rayliant Quantamental Emerging Market Equity ETF

Emerging market ETF investing can gain steam this year due to undervaluation, likely halt in Fed rate hikes, falling EM inflation and higher growth rates (than developed economies).

Time for Emerging Markets ETFs?

Matthews Korea Active ETF

Matthews Asia has launched the Matthews Korea Active ETF (NYSE Arca: MKOR), which invests in companies located in South Korea. The active fund seeks to invest in companies in South Korea capable of sustainable growth based on their fundamental characteristics.

Matthews Asia Targets South Korea With MKOR ETF

Matthews Emerging Markets Equity Active ETF

The Matthews Emerging Markets Small Companies fund has delivered a 15.1% annualized three-year return, landing it in the top 1% of its peers. Here's what manager Vivek Tanneeru is buying now.

This Top-Performing Small-Cap Manager Is Betting Big on China

Matthews China Active ETF

Matthews Asia Innovators Active ETF

When investing in emerging markets, Matthews Asia's head of portfolio strategy David Dali said at Exchange 2023 that active management is key. “Our benchmarks tend to be blind to things like corporate governance and regulatory issues and geopolitics,” Dali told NYSE's Judy Shaw.

NYSE's ETF Leaders: Matthews Asia's David Dali

It's the first actively managed emerging market exchange-traded fund to exclude China.

Matthews Asia Adds EM ex-China ETF

Matthews Asia launched the Matthews Emerging Markets ex China Active ETF (NYSE Arca: MEMX) on the New York Stock Exchange today, adding to the firm's active ETF suite. MEMX allows investors to separate China from their core emerging markets allocations, thereby taking control over the level of China exposure in their portfolios.

News for Matthews Emerging Markets Ex China Active ETF ETF (MEMX)