Matthews Asia has recently appointed Neil Steedman as UK business development head, a new position for the company. What is the significance of this appointment?
Matthews Asia has spent 23 years as the leading Asian investment specialist in the US.
In 2010, we made a strategic decision to make Matthews Asia’s equity and fixed income strategies more accessible to global investors.
When we established priority markets for this initiative, the UK was high on the list.
British investors’ have a longstanding engagement with Asia, an established tradition of supporting specialist managers, and an appreciation for active, non-benchmark, long-term investment styles focused on quality.
Neil’s appointment and our permanent office in London signify that Matthews Asia’s commitment to the UK marketplace – and to our distribution partners with substantial operations in the UK – is a long-term commitment.
We recognise the importance of being accessible to our clients and building our brand consistently over the course of time.
Our team is now based across San Francisco, London and Hong Kong, making us well-placed to provide high-quality products and services to distribution partners globally.
What is the ownership structure of Matthews Asia?
Paul Matthews founded the firm in 1991. Paul began his career at GT Capital Management after graduating from Cambridge University in the UK.
Matthews Asia is a privately held company with employees comprising the largest shareholder group.
Portfolio managers at Matthews Asia are owners of our business and also typically invest in the funds that we manage.
This creates a meaningful alignment of interest with our clients.
What is your own job remit?
Our team’s remit to globalise Matthews Asia’s client base and brand has three main facets:
- Identify and prioritise the market geographies and segments that are the best fit for the investment capabilities that Matthews Asia offers.
- Develop relationships with investors, distributors, platforms and influence-makers who we want to comprise Matthews Asia’s client base.
- Explain and represent how our investment team thinks about investing in Asia and how those views are reflected in the funds we manage on behalf of our clients.
I am fortunate to have a tremendous team to work with in these endeavours and we have the privilege of representing a first-class investment team.
Can you highlight one particular challenge Matthews Asia has faced in establishing a presence in a new market?
Regulation and brand building are undoubtedly issues for newcomers to international markets, but among the challenges that a privately owned specialist firm faces when establishing a global funds presence, the most practical might be small fund size.
This may sound peculiar coming from a firm with $27bn of assets under management, but small fund size can be a real obstacle in the early days of a new fund family.
Many investors and distributors have implemented guidelines that restrict their utilisation of small funds.
This has exacerbated the herd-like investor mentality of recent years, the emergence of blockbuster funds and capacity problems that have plagued some of our peers.
In any distribution effort, the first dollar is often the most challenging to secure.
Demonstrating long-term track records of sister funds that follow the same investment strategy as our offshore funds has been helpful, and we cap the expense ratios of all
Matthews Asia funds in order to protect the interests of early investors.
Nevertheless, getting each new fund’s AUM across the thresholds to make them eligible for broader distribution requires a lot of perseverance.
How are regulatory changes impacting on sales of Matthews Asia funds across the world?
As for most firms in our industry, regulatory changes have created some challenges, but also some opportunities.
Our funds are long-only, transparent, daily priced funds so the regulatory and market move towards transparent and comprehensible products is favourable for us.
We believe the trend towards commission-free distribution will continue to gain momentum over the coming decade and will favour firms such as ours, which compete on the quality of product and service.
Explain where Matthews Asia operates in the world, and which are its priority markets?
From an investment perspective, our hub is San Francisco.
Our 38-strong investment team has been based in San Francisco throughout the firm’s history and each member of the team travels regularly to Asia for research.
From a client perspective, we have been offering Asian equity funds in the US for more than 20 years and currently have approximately 50% market share of actively managed Asian equity funds sold in the US.
During the past four years, our client base has expanded to become truly global.
As part of this evolution, we have established offices in London and Hong Kong for business development and client service.
Key markets for our firm in Europe include the UK, Switzerland and Germany.
We intend to build our client base in continental and Northern Europe over the coming years, particularly given that a number of our distribution relationships span across multiple markets in Europe.
Having said that, our physical infrastructure is likely to remain centred in London and we anticipate UK-based investors and distributors will comprise the core of our client base.
Hong Kong and Singapore are our main focus in Asia at the moment and we have a growing client base in Chile and other Latin American markets.
Which distribution channels does Matthews Asia use and what is their relative importance?
Our distribution strategy reflects our culture, the specialist nature of our firm and the importance of blending operational efficiency with a high quality service proposition.
We seek to work with partners who believe dedicated allocations to Asian equities and fixed income should be a strategic component of investment portfolios.
We believe the international life insurance companies’ investment-linked products are a good fit for long-term investment funds such as ours.
IFAs who often invest via portfolio bonds and regular savings products are another key channel for us.
There is an opportunity to build loyal relationships provided one is prepared to commit time and energy to proactive, value-added service and support.
Interestingly, a substantial proportion of Matthews Asia’s longest standing clients in the US are IFAs.
In the UK and continental European markets, discretionary wealth managers and family offices are an important client base for our firm.
We complement these professional investor channels with global private and consumer banking relationships.
Which products are selling well at the moment?
For several years, income was all the rage and our dividend strategies received much attention.
We continue to believe their stable return profile is relevant for investors globally.
More recently, growth equity strategies, such as Asian small caps and Indian equities have come back into view.
We anticipate that investors will re-engage with China over the coming years.
Are you targeting locals as well as expats?
Yes. Local investors, particularly in Asia, tend to look at Asia in a more granular fashion than investors in other regions.
While our pan-Asia funds such as Pacific Tiger, which currently has £300m in fund assets, and Asia Dividend, which currently has £435m in fund assets, are popular with investors across regions, our single-country funds, such as India, or specialist funds, such as China Dividend and China Small Companies, may better fit what local investors seek for their Asian equity exposure.
Are you planning to launch any new products aimed at the retirement market, both in the UK and internationally, in 2015?
We believe our income-generating products such as Asia Dividend and Asia Strategic Income will be a value-added component of retirement oriented portfolios, but we are not planning new products specifically for this market.
How is your overall product strategy shaping up for 2015?
Our firm is very methodical when it comes to new product launches.
This past year, we launched an Asian fixed income fund (Matthews Asia Strategic Income) and a concentrated equities fund (Matthews Asia Focus) on our offshore funds platform.
We also added distributing share classes to our flagship Matthews Pacific Tiger Fund.
We have received demand to bring our Japan equity strategy to the offshore funds platform, so that is under consideration.
For now, we are focused on promoting our existing line-up of funds and continuing to provide high-quality service to our partners.
