September 2020 IssueLong scroll reading

Matthews Asia: High Profile Shuffle, Limited Downside

By David Snowball

On August 24, 2020, Matthews Asia announced a long set of manager changes and one fund liquidation. While they appear in a single document, there are at least two distinct triggering events behind them.

Event One: The departure of managers Tiffany Hsiao and YuanYuan Ji. Ms. Hsiao managed Matthews China Small Companies (MCSMX, since 2015) and, with long-time lead manager Michael Oh, Matthews Asia Innovators (MATFX, since 2018). Ms. Ji was the second manager of China Small Companies. Their departure was, so far as I can tell, a surprise to all. There is no word on their reason for leaving or their next steps.

Matthews’ formal response was emphasized the firm’s unquestioned strengths and continuity: “Our firm places significant emphasis and resources on retention of talent and while we are disappointed in her decision to leave the firm, we continue to have a very deep bench of investment team talent with over 40 investment professionals.”

Event Two: The announced liquidation of Matthews Asia Value (MAVRX), which has closed to new investors and will cease to exist on September 30, 2020. The liquidation is a sad event because the strategy was thoughtful, the fund fairly successful when judged in investment terms, and the manager is fiercely intelligent and innovative. Nonetheless, the liquidation was a surprise to (almost?) no one: the fund is approaching its fifth anniversary with $10 million AUM, and assets have been dribbling away for about 18 months.

Subsequently, lead manager Beini Zhou announced his departure. CityWire avers that “The fund’s liquidation is not connected to Zhou’s departure,” a somewhat curious observation.

The departure of Ms. Hsiao is a major loss. CityWire ranks her as a “AAA” manager and describes her as “a star.” By their rating system, she was the second-ranked female portfolio manager in the US. (No, sorry, I don’t know who #1 is or how meaningful their ratings are.). She’s piloted China Small Companies to a five-star record and considerable acclaim. She’s been described as “brilliant and driven.” Over the past five years, roughly the period in which she’s managed the fund, China Small Companies has the highest returns (21.5% annualized) and highest Sharpe ratio (0.99) of any China region fund in the Lipper database. Asia Innovators, which has always been a top tier fund, has had a particularly strong performance over the past couple of years, a period that corresponds with her time on the fund.

I don’t mean to downplay the significance of Ms. Ji’s role but her tenure at Matthews is shorter and her contributions less well-documented than Ms. Hsiao’s or Mr. Zhou’s. My apologies if I’m underestimating her contributions.

“Major loss,” though, is not the same thing as “irreparable loss.” Ms. Tsiao’s departure triggered several reassignments within the Matthews corps.

The Zhou changes

Matthews Asia Value (MAVRX)

Out: Beini Zhou

In: Robert Horrocks

Note: the fund liquidates as month’s end, so Mr. Horrocks is a sort of caretaker.

Matthews Emerging Markets Equity Fund (MEGMX)

Out: Beini Zhou

In: John Paul Lech remains as the sole manager; he’s been on board since inception.

Note: the fund launched in April 2020; it is tiny but has had a strong opening run. The key is that this is one of Matthews’ first moves outside of Asia. Fortunately, Mr. Lech has had a long career as a diversified EM analyst with Oppenheimer before joining Matthews.  It might be emblematic that his languages are Spanish, French, and Portuguese rather than, say, Mandarin (one of Mr. Zhou’s languages).

The Hsiao changes

Matthews China Small Companies (MCSMX)

Out: Tiffany Hsiao and YuanYuan Ji

In: Winnie Chwang and Andrew Mattock

Note: Ms. Chwang is co-manager of Matthews China and of Matthews Asia ESG, and had worked as an analyst on China Small Companies. Mr. Mattock is the lead manager of Matthews China (MCHNX) which has the third-highest returns of any China-centered fund over the past five years. The folks at Matthews report that “Both Winnie and Andrew have significant experience researching and investing in small companies in China and have a deep understanding of the China Small Companies Strategy’s current portfolio holdings.”

Matthews Asia Innovators Fund (MATFX)

Out: Tiffany Hsiao

In: Raymond Deng as co-manager, Michael Oh continues to lead the fund.

Note: Mr. Deng is a China specialist, as Ms. Hsiao was. Mr. Oh continues to lead the fund.

The Hsiao and Zhou change

Matthews Asia Small Companies Fund (MSMLX)

Out: Beini Zhou and Tiffany Hsiao

In: Vivek Tanneeru

Note: Mr. Tanneeru co-manages Matthews Asia ESG, where he remains. He’s a well-respected pan-Asia generalist rather than a country specialist, with experience on the Asia Dividend team.

The other changes

These were made “in order to add specific country and sector expertise to our core regional Asia portfolios,” so their inclusion with the others is mostly a matter of convenience.

Matthews Asia Growth & Income (MACSX)

Out: John Paul Lech, to focus only on Emerging Markets Equity

In: Satya Patel, as co-manager behind Robert Horrocks, Ph.D., and Kenneth Lowe

Note: the Big Dogs remain at the helm, so the changes likely have minimal effect. Mr. Patel is part of Teresa Kong’s income team and his role here is to provide additional income support expertise (convertibles, dividend stocks, credit opportunities) for the Income side of “Growth & Income.”

Matthews Asia Growth (MPACX)

Out: no one.

In: Taizo Ishida remains at the helm but Michael Oh, as co-manager

Note: Mr. Oh has been added to bring more specific sector expertise. This fund, like his Innovators fund, are pure growth Pan-Asia funds so the addition makes particular sense.

Bottom line

The departures strike us as substantial but manageable losses. Matthews has handled manager transitions well in the past, it has a lot of in-house talent and has made what appear to be sensible reassignments. If you’re currently invested in any of the funds affected, I’d surely spend a bit of extra time and attention tracking performance and reading the new manager’s discussions, but there is no cause for shifting away from the funds. If I were not invested but had been considering the possibility, I would stay the course. Learn a bit more about the new folks then build up from modest initial positions as your comfort grows.


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About David Snowball

David Snowball, PhD (Massachusetts). Cofounder, lead writer. David is a Professor of Communication Studies at Augustana College, Rock Island, Illinois, a nationally-recognized college of the liberal arts and sciences, founded in 1860. For a quarter century, David competed in academic debate and coached college debate teams to over 1500 individual victories and 50 tournament championships. When he retired from that research-intensive endeavor, his interest turned to researching fund investing and fund communication strategies. He served as the closing moderator of Brill’s Mutual Funds Interactive (a Forbes “Best of the Web” site), was the Senior Fund Analyst at FundAlarm and author of over 120 fund profiles. David lives in Davenport, Iowa, and spends an amazing amount of time ferrying his son, Will, to baseball tryouts, baseball lessons, baseball practices, baseball games … and social gatherings with young ladies who seem unnervingly interested in him.