MFS

Recent regulatory changes by authorities in China and the United States have raised concerns around investing in Chinese companies. In light of these concerns, we feel it important to detail how MFS approaches China opportunities from an active risk management perspective.

The assessment of these risks has long been a part of our bottom-up research process, and we regularly analyze them at the stock, sector and portfolio levels. While some of the risks are well known and reported on — such as the variable interest entity (VIE) structure used by many offshore listed Chinese companies — our approach is to assess a broad range of upside and downside risks, including extreme outcomes, to optimize the tradeoff between risk and reward. As with any country, we thoroughly examine each investment opportunity in China from the perspective of long-term sustainability, paying particular attention to government regulation and corporate governance.

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