July 9, 2020

Matthews Asia launches complement to GEM giants


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Mat_horizontalFrom International Adviser BY: Esther Armstrong

Matthews Asia has unveiled a Ucits-compliant version of its smaller companies strategy, available in the US since 2008, billing it as fund to complement investors’ existing large cap exposure to Asia ex-Japan.

The Luxembourg-domiciled Matthews Asia Small Companies Fund will primarily invest in companies with a market cap between $100m and $3bn and will take advantage of a deepening in the smaller companies investment universe in recent years.

Approximately 3,800 small companies are now listed on the stock markets in Asia ex-Japan, Matthews Asia said, which is more than the 3,400 of comparable market cap listed in the US.

Fund managers Lydia So and Kenichi Amaki, said: “For many investors their current exposure to either global or regional emerging markets is with a portfolio comprised of large capitalised companies.

“Typically these portfolios will invest in companies that have a market cap far in excess of $5bn and therefore make only very small allocations to small companies. We believe this fund complements holders of core emerging market and Asian equity funds.”

Investor favourites

Core emerging market funds, such as Aberdeen Emerging Markets and First State Global Emerging Market Leaders, have been plagued by capacity issues as their popularity has led to concerns they will not be able to maintain liquidity and thus their investment styles will be constrained.

Aberdeen has since introduced an initial charge for new investors to try and protect existing investors in the fund, while First State has written to investors to say it is looking at its options.

Matthews Asia said it does not have a target size for the fund, but added the asset class continues to grow and evolve and so has capacity to accommodate reasonable growth.

“We will critically review the asset size of this strategy on an ongoing basis to ensure our ability to consistently apply our management discipline over the long term to the benefit of our existing investors,” So and Amaki said.

The US version of the fund has delivered a three-year annualised return of 10.39% versus a benchmark return of 4.45%, according to Matthews Asia.

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