Skip to Content
Fund Spy

Approach China Funds Carefully

China funds are quite risky and vary widely in their makeup.

Mentioned: , , , , , , , ,

China funds are becoming increasingly fashionable. Indeed, when JP Morgan China Region (JCHAX) and SPDR S&P China (GXC) opened earlier this year, they became the 17th open-end mutual fund and fourth exchange-traded fund, respectively, that focus on the Middle Kingdom. There also are five closed-end funds that concentrate on China, so there are 26 such funds overall. And these 26 funds now have more than $14 billion in assets, including approximately $1.1 billion in the largest open-end fund ( Matthews China (MCHFX)) and $4.6 billion in the biggest ETF ( iShares FTSE/Xinhua China 25 Index (FXI)).

Those numbers dwarf those of all other types of single-country emerging-markets funds. India funds are the second most-common type of such offerings, but there are only five of them and they have a total of $4.5 billion in assets. And there are only five Korea funds, which are the third most-common type of such offering, and they have less than $3 billion in assets in aggregate (and one small open-end Korea fund is likely to be merged away later this year).

But investors should be sure that keep the growing popularity of China funds--as well as the huge gains these funds have posted recently--in perspective. Here's why.

William Samuel Rocco does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.