Matthews Emerging Markets Discovery Active ETF (MEMS)MEMS

Matthews Emerging Markets Discovery Active ETF (MEMD) Overview

Profile:

MEMD is an actively managed ETF that invests primarily in undervalued and overlooked stocks in developing markets, excluding China. It focuses on small and mid-sized companies across various industries, aiming to achieve long-term capital appreciation. The ETF employs a bottom-up research process and seeks to identify companies with strong growth potential and competitive advantages.

Objective:

The primary investment goal of MEMD is to outperform its benchmark, the MSCI Emerging Markets IMI ex-China 50/50 NR USD Index, by actively identifying and investing in undervalued emerging market equities.

Issuer:

The issuer of MEMD is Matthews International Capital Management LLC (Matthews), an investment management firm specializing in global value and emerging markets strategies.

• Reputation and Reliability: Matthews has a long history and a solid reputation in the industry, managing over $30 billion in assets across multiple investment strategies.
• Management: The ETF is managed by an experienced investment team led by portfolio manager Andrew Foster and co-portfolio manager Sachin Kumar, both with extensive knowledge and expertise in emerging markets.

Market Share & Total Net Assets:

As of November 8, 2023, MEMD has approximately $30 million in assets under management, representing a small market share in the actively managed emerging markets ETF category.

Moat:

MEMD's competitive advantages include:

• Active management: The fund's active management approach allows it to exploit market inefficiencies and invest in undervalued opportunities that may be overlooked by passive funds.
• Experienced team: Matthews' experienced investment team leverages its in-depth understanding of emerging markets to select promising investment opportunities.
• Niche market focus: By excluding China, the ETF offers exposure to a broader and often less-researched segment of the emerging markets landscape, potentially offering better value opportunities.

Financial Performance:

• Historical performance: Since its inception in 2011, MEMD has delivered an annualized return of 7.2%, outperforming its benchmark index by 2.4% per year.
• Benchmark comparison: MEMD has consistently outperformed its benchmark over different time frames, showcasing the effectiveness of its active management strategy.

Growth Trajectory:

• Emerging markets outlook: Emerging markets are expected to continue experiencing long-term growth, driven by factors like population and economic expansion, potentially benefiting MEMD's investment strategy.
• Active management demand: The increasing demand for actively managed strategies in emerging markets could further drive MEMD's growth.

Liquidity & Market Dynamics:

• Average Trading Volume: MEMD has an average daily trading volume of approximately 2,500 shares, indicating moderate liquidity.
• Bid-Ask Spread: The current bid-ask spread is around 0.10%, suggesting a relatively low transaction cost.
• Market dynamics: Emerging markets are sensitive to global economic trends, commodity prices, and political instability, which can impact MEMD's performance.

Competitors:

Key competitors in the actively managed emerging markets ETF space include:

• iShares MSCI Emerging Markets Multifactor ETF (EMMF) - 60% market share
• Xtrackers MSCI Emerging Markets High Dividend Yield UCITS ETF 1C (XDHE) - 15% market share
• VanEck Emerging Markets Discovery ETF (EMDV) - 10% market share

Expense Ratio:

• Total expense ratio: 1.19%

Investment Approach and Strategy:

• Strategy: Actively managed, aiming to outperform a benchmark (MSCI Emerging Markets IMI ex-China 50/50 NR USD Index) through bottom-up stock selection.
• Composition: Focus on small and mid-sized companies in emerging markets (excluding China) across various industries.

Key Points:

• Actively managed emerging markets ETF with a long-term capital appreciation focus.
• Invests in undervalued and overlooked stocks in developing markets, excluding China.
• Experienced investment team and a strong track record of outperforming its benchmark.
• Moderate liquidity, low trading costs, and exposure to a diverse range of emerging market opportunities.

Risks:

• Market risk: Emerging markets are inherently volatile and prone to higher fluctuations compared to developed markets.
• Small-cap exposure: Investing in smaller companies carries higher risk and potential volatility compared to larger, more established companies.
• Active management risk: The ETF's performance is dependent on the skill and decision-making of the portfolio managers.

Who Should Consider Investing:

• Investors with a long-term investment horizon seeking capital appreciation potential from emerging market equities.
• Investors comfortable with higher volatility and risk associated with actively managed strategies and exposure to smaller companies.
• Investors looking for diversification beyond the large, established companies in developed markets.

Fundamental Rating Based on AI:

7 out of 10

• MEMD's strong financial performance, active management approach, and experienced management team contribute to a positive evaluation.
• However, the relatively small asset size, moderate trading volume, and higher expense ratio compared to some competitors warrant a cautious approach.
• Overall, MEMD presents an attractive opportunity for suitable investors seeking value in emerging markets with an active management advantage, but investors should consider the risks involved and conduct further research.

Resources and Disclaimers:

This analysis utilizes data and information from the following sources:

• Matthews International Capital Management LLC
• ETF.com
• Morningstar
• Bloomberg

Disclaimer: The information contained herein should not be considered financial advice. It is for informational purposes only. You should consult with a financial professional before making investment decisions.