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Fund Spy

An Inside Look at the China Funds' New Home

These funds belong together, but they're far from identical.

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Three new Morningstar categories debuted on Oct. 1. In a column announcing the changes, Russel Kinnel, Morningstar's director of mutual fund research, detailed the new groups and offered examples of funds from each. Given the interest in all things China, we thought many readers would like a deeper look at the China Region category in particular, as well as an update on the group these funds left behind.

Why China? Why Now?
The fact that Morningstar created a category solely devoted to China funds should not be interpreted as a broad endorsement of these funds or their mission. Nor are we "initiating coverage" on a large batch of China funds. All of these funds were already in our database, and a few were already receiving analyst coverage. We may add more of them to our coverage list over time, but that decision isn't tied to the introduction of the new category.

Rather, we had taken note that as the number of China-related funds proliferated over the years, they created problems for the Pacific/Asia ex-Japan category in which they resided. That group was intended for funds devoted to the broad sweep of "emerging Asia." Although, in years past, it did include a few portfolios devoted solely to Korea or other countries, such funds were tangential. However, when the number of open-end China funds exploded, growing to more than 20 in all--not to mention the many closed-end and exchange-traded funds that also target that market--their heft skewed the entire category's performance and portfolio averages in a China-heavy direction.

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