Odd Portfolios Are Good Bet

For investors who want to be well-positioned for a turnaround in Asia, their best bet might be to ignore recent performance and look for mutual funds with the most unusual portfolios.

That’s because it’s the oddball funds, such as the $38 million Matthews Pacific Tiger Fund and the $12 million Lexington Crosby Small Cap Asia Growth Fund, that may be best poised to profit when Asia recovers, according to an analyst at mutual fund researcher Morningstar Inc.

For aggressive investors, “I’d look beyond funds invested in the main Asian markets and blue chips,” said Bill Rocco, an analyst at Morningstar who specializes in emerging-market funds and recommends both the Lexington and Matthews funds because they are “strong stocking-picking funds.”

Most Pacific Rim funds that exclude Japan have fled to blue-chip Hong Kong companies as safe havens, or have loaded up on cash, helping them to keep average losses to 35.52 percent last year, according to Lipper Analytical Services.

Not these two.

While the Matthews fund has 32 percent of assets in Hong Kong, “most of our holdings are niche companies” like Vitasoy International Holdings Ltd., which makes non-alcoholic drinks, said Mark Headley, who manages the fund. “Our portfolio doesn’t look like anyone else’s.”

Matthews also has 8 percent of its assets in South Korea, 7 percent in the Philippines and 4 percent each in Malaysia, Indonesia and Thailand. Many other Asian funds have gotten out of these countries all together.

Matthews Pacific Tiger fund lost about 41 percent of its money last year, and is down about 10 percent so far this year. The best performing Asian fund this year, the Phoenix Aberdeen New Asia Fund, is only down 4.38 percent.

Nonetheless, investors have been pumping cash into the Matthews fund, whose assets climbed by 20 percent in the last week.

The Lexington Crosby fund has also attracted some investor money, said Larry Kantor, managing director of Lexington Global Asset Managers, although it has been turning away investments of $300,000 or more from any one investor to help avoid hot money jumping in and out of the fund.