Here’s why it might make sense to diversify into some Asian mutual funds, according to analysts at S&P Capital IQ: While Europe’s growth will be hampered by debt turmoil in the next year, growth in Asia is expected to continue to exceed that of the United States. The International Monetary Fund predicts China will grow at 9% in 2012, and Indonesia, Malaysia, Philippines, Thailand and Vietnam combined will grow at 5.6%, compared to a 1.8% growth forecast in 2012 for the U.S.
S&P Capital IQ looked for international mutual funds focused on Asia that it ranks five stars, with managers who have been leading the fund at least five years. Length of manager tenure is important because long-tenured managers have most likely been through a few market cycles, according to the report. The funds S&P Capital IQ determined are worth investigating are: Templeton China World Fund, Class A shares (TCWAX); Matthews Pacific Tiger Fund, Investor Class (MAPTX); and Invesco Asia Pacific Growth Fund, Class A Shares (ASIAX).
All these funds have underperformed U.S. indices so far this year, the report noted. However, the three five-star funds the report highlighted have performed better than peers on a long-term basis. Of the three, Invesco Asia Pacific Growth has the best performance year-to-date, falling 5.6% (compared to an average of 12.4% among peers). Matthews Pacific Tiger Fund has a “notably lower expense ratio” than peers (it is 1.09%, compared to a peer average of 1.84%). The Templeton China World Fund has low turnover of 6%, lowest of the funds S&P Capital IQ analyzed and also well below the peer average of 78.3%.