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Matthews Asia rolls out first GEM fund

The firm has also hired a dedicated analyst who specialises in emerging markets outside of Asia.
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San Francisco-based Matthews Asia has expanded its product line-up with the launch of the Matthews Emerging Markets Equity Fund, according to a statement from the firm.

This will be the first global equity fund that the firm will be managing, in which the investment universe will include equities outside of Asia. Since the firm’s founding in 1991, it has been managing at least 17 Asia-focused strategies, including regional and single-country products, according to the firm’s website. As of the end of March, the firm’s AUM was $19.8bn.

The new emerging markets fund was launched in the US at the end of last month and is available to investors in the country. FSA sought more information from Matthews Asia, but the firm was not able to reply in time for publication whether the strategy will be made available in other markets.

“Our decision to launch this strategy is anchored by the fact that Asia now represents the majority of emerging market indices,” the firm said in the statement, noting that Asia accounts for 75% of the MSCI Emerging Markets Index.

The firm also believes that it will be able to apply its investment experience in Asia to markets outside the region.

“We believe our investment process, which seeks to identify good quality companies and management teams with strong corporate governance and reasonable valuations, is one that can be applied equally as well to markets outside of Asia.

“In general, quality businesses tend to exhibit similar characteristics across geographies, including being cash-generative, having strong growth prospects, low levels of leverage and strong business moats that support margin growth and profitability,” the firm said.

New hire

In line with the fund launch, the firm has also expanded its investment team with the hire of senior research analyst Alex Zarechnak this year, according to the statement. Zarechnak, who will be a dedicated analyst on the new fund, has 25 years of experience in emerging markets outside of Asia.

Before Matthews Asia, Zarechnak was at Wellington Management, where he was an analyst for the firm’s flagship emerging markets equity fund. At Wellington, he first covered Central and Eastern Europe, Middle East and Africa, then Latin America. He began his emerging markets career as a Moscow-based Russia equity analyst at Franklin Templeton.

Leading the fund are portfolio managers John Paul Lech and Beini Zhou, who both manage other funds. Lech co-manages the firm’s Asian Growth and Income Fund, while Zhou manages the Asia Value Fund and co-manages the Asia Small Companies Fund, according to the firm’s website.

Peeyush Mittal, who manages the firm’s India-focused strategy, will also serve as an analyst on the emerging markets equity strategy, the statement added.

Investment strategy

The Matthews Emerging Markets Equity Fund has a bottom-up approach to investing and prefers quality companies, according to the statement.

Businesses should be domestically-oriented, have experienced management teams, good corporate governance, it explained. The fund also employs an all-cap approach, as the firm believes that small companies may offer attractive potential for generating alpha.

The fund also aims to have a low portfolio turnover and will hold 50-65 names, it added. New positions will be modestly sized, at 0.5%-1% of the portfolio, and the largest positions will tend not to exceed 5%.

The fund’s team will make use of a “milestone-based approach” to increasing conviction and position weight. These milestones are typically non-financial and focus on the execution of stages of the long-term growth strategy by the company. As the team’s understanding and conviction in a company increase, then sizing may also increase.

Part of the Bonhill Group.