Is Fidelity China Region Fund (FHKCX) A Strong Mutual Fund Pick Right Now?

Having trouble finding a China - Equity fund? Well, Fidelity China Region Fund FHKCX would not be a good potential starting point right now. FHKCX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify FHKCX in the China - Equity category, an area that is rife with potential choices. China - Equity mutual funds almost exclusively target stocks throughout China, Taiwan, and Hong Kong. China has changed drastically over the years, and even though we still associate the country's economy with export-focused manufacturing, it now focuses more than ever on its middle class. If you like the sounds of this investment method, then FHKCX could be worth a closer look for your portfolio.

History of Fund/Manager

Fidelity is responsible for FHKCX, and the company is based out of Boston, MA. Since Fidelity China Region Fund made its debut in November of 1995, FHKCX has garnered more than $1.29 billion in assets. Bobby Bao is the fund's current manager and has held that role since October of 2011.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 12.73%, and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 10.45% The fund's 3-year annualized total return of 10.45% places it in the top third, a metric that will likely stand out if you prefer to look at shorter time frames.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, FHKCX's standard deviation comes in at 22.05%, compared to the category average of 21.9%. The fund's standard deviation over the past 5 years is 18.53% compared to the category average of 18.48%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In FHKCX's case, the fund lost 57.13% in the most recent bear market and outperformed its peer group by 4.18%. These results could imply that the fund is a better choice than its peers during a sliding market environment.

And for investors concerned about the potential drawdown in a really bad calendar year, we can look back to 2008 for that figure. In its worst calendar year in a decade, the fund lost over 44.84%.

Investors should note that the fund has a 5-year beta of 1.06, so it is likely going to be more volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. FHKCX has generated a negative alpha over the past five years of -1.75, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FHKCX is a no load fund. It has an expense ratio of 0.96% compared to the category average of 1.58%. From a cost perspective, FHKCX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment has no minimum amount.

Bottom Line

Overall, Fidelity China Region Fund FHKCX has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the China - Equity, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.