How We Invest

We draw on our 25 years of experience to identify investment opportunities that stand to benefit from growth in Asia.

Our Approach

We believe in the long-term growth of Asia. We strive to convert that belief to results for our clients through an investment approach that is deeply in sync with their institutional values.

The fundamentals of investing rest at the core of how we work on behalf of our clients. That means we invest for the long term. Rather than passively relying on equity indices built on historical performance, we seek alpha by actively managing our portfolios and conducting in-depth, on-the ground fundamental research to identify the most compelling opportunities while minimizing downside risk. This is how we built our 25-year track record in Asia—and how we plan to carry our work forward into the next 25 years and beyond.

Long-Term Focus

Asia’s growth and dynamism tempt speculation. But we believe that to consistently capitalize on Asia’s potential, investors must take a long-term approach, rooted in deep understanding of the economic evolution of the region and combined with bottom-up research on individual businesses that may benefit from that evolution. We develop our understanding of the economic forces driving growth in Asia—and our insight into the businesses that are best positioned to thrive in Asia—through an unwavering commitment to in-person, on-the-ground fundamental research and objective analysis.

Active Management

Passively gaining exposure to Asia through equity indices is not enough. Many of Asia’s equity indices are weighted by market capitalization. This means they’re effectively backward-looking—rife with yesterday’s winning companies, but missing tomorrow’s biggest opportunities. Investors seeking alpha potential—the potential to generate excess return—can’t afford to settle for a passive approach.

That’s why we pursue active, high-conviction, index-agnostic portfolio management, based on 25 years of experience in selecting Asian equities, rather than a passive, index-based approach. Our process draws on our collective knowledge and experience to develop expectations not just at the country, industry, or sector level, but at the individual-business level.

With 43 investment professionals focused solely on the region, we believe we are well positioned to drill down into less-known and less-followed businesses to identify long-term opportunities that may not be readily visible to others. The result is portfolios that differ substantially from benchmarks, with high active share. Our in-depth assessment of financial positions, resource allocation decisions, incentive structures, ownership history, governance practices—and much more—ensures that we understand the facts behind the reporting as we work to generate alpha for our clients.

Fundamental Research

Developing the information and insight we need to identify superior opportunities in Asia takes commitment—of time, of resources, and of ourselves. When we engage with a company, we seek to gain not just a narrow assessment of its prospects, but a broader understanding of the entire ecosystem in which it operates.

A typical on-site company visit includes not just meetings with the CEOs and decision-makers of a company, but also trips to their production facilities and warehouses. Our on-the-ground analysis then extends to supply chain partners, competitors, and industry and economic experts. In addition, we visit real estate developments, hotel chains, department stores, and other retailers to gain a sense of the consumer environment, and we meet with local individuals, including real estate professionals, trade association representatives, and government and central bank officials, to gain first-hand perspective on various segments of the economy. This effort translates into more than 2,500 company meetings each year, including over 1,000 on-site visits each year in locations ranging from Asian financial centers to remote inland outposts.

The depth and rigor of our research process provides us with a high degree of confidence in the businesses we hold. While we continually revisit our thesis, debating the merits of continued ownership and maintaining positions only when our conviction remains high, our long-term approach paired with our extensive, on-the-ground research allows us to use volatility as an opportunity. When sentiment is negative and markets are volatile, when shorter-term or less well-informed investors are typically selling and valuations are low, our research gives us confidence that we can use that opportunity to increase our exposure to quality companies at attractive valuations. We believe this to be a significant source of alpha for our clients.

Key Characteristics of a Matthews Asia Portfolio Company

Survivability and sustainability

Sound fundamentals
Strong balance sheets
Viable business models and pricing power
Ability to maintain reasonable long-term growth

Competent management

Credible business strategy
Demonstrated ability to execute
Aligned incentives

Long-term potential

Attractive valuations grounded in realistic expectations

3,554 Company Meetings in Asia Since 2013

Developed Asia Emerging Asia Frontier Asia
Country
219 meetings
Data as of October 17, 2016
*Macau grouped with China in emerging Asia category.
**Laos is not officially classified as a frontier market,
but aligns most closely to this category and
grouped as such for illustrative purposes only.
    Data as of October 17, 2016
    *Macau grouped with China in emerging Asia category.
    **Laos is not officially classified as a frontier market,
    but aligns most closely to this category and
    grouped as such for illustrative purposes only.

    Risk Management

    Asia is inherently volatile. Over the course of our 25 years of experience in the region, Matthews Asia has developed a rigorous—and road tested—approach to risk management. We manage risk at three levels:

    • At the portfolio level, through our in-depth, bottom-up research process and rigorous sell discipline;
    • At the CIO level, through constant monitoring for consistency with our investment approach and philosophy; and
    • At the enterprise level, by the firm’s Enterprise Risk and Compliance Committee (ERC), which includes the independent Investment Risk Committee (IRC).

    Matthews Asia’s organizational structure reflects the high priority we place on risk management. Our dedicated, independent risk-management function, housed with the Risk and Compliance Department, oversees both enterprise and investment risk. The Risk and Compliance Department is led by our Global Head of Risk and Compliance, who reports directly to the firm’s CEO.

    Investment Strategies

    To capitalize on Asia’s economic evolution, you need innovative Asia equity and fixed income solutions across the risk-reward spectrum that meet your specific investment objectives. With Matthews Asia, you gain access to a team of experts with a 25-year track record investing in the region, managing a range of institutional-quality investment strategies that provide exposure to the equity and bond markets of one of the world’s fastest-growing regions.

    Our strategies range from country-specific to pan-regional solutions that provide diverse exposure across sectors, themes, and market capitalization. We offer growth-, value- and income-oriented strategies. Our latest innovations include dedicated Asia Debt and Asia ESG strategies to capitalize on some of the newest and most promising long-term opportunities we see in the market.

    Our capabilities include the following Asian investment strategies:

    • Broad Asia core regional strategies including or excluding Japan
      • Growth
      • Value
      • Income
    • Single country strategies
      • Japan
      • China
      • India
      • Korea
    • Completion strategies
      • Small cap
      • Asia frontier markets
    • Asia Debt strategies
    • ESG strategies
    • Bespoke investment solutions to meet our clients’ unique needs

    We are careful to introduce new strategies only when we see a compelling, long-term investment opportunity, not merely when conditions seem ripe for asset gathering.

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