Horrocks says the new fund will have a significant weighting in Chinese companies but could invest in firms from India to New Zealand and will incorporate all of south-east Asia. It may even invest in companies domiciled outside Asia, he adds, provided the majority of their business is derived from the region.
A big investment theme for the fund, in addition to growth in China, will be tapping into the opportunities presented by the rise in consumption among the middle classes across the region.
“Asia is set to be two-thirds of global middle class consumption by 2050. So even though we have seen this enormous rise in the middle classes in Asia, it is really just getting started in terms of the long-term story.”
Grand prix
Investing in Asia is a bit like being in a Formula 1 Grand Prix, according to Horrocks. “Those are the fastest cars in the world, right? They can travel at speeds equivalent to a small aeroplane. The key to winning the race is getting the mechanics right, getting the pit stop right, making sure the right wheels are on the car, the gas is in the tank. It is a little bit like that with Asian investing.
“These are the fastest-growing countries in the world. The key to getting it right is making sure the cash is being generated by the company, that the management is reasonable, they have a decent business plan and that, as a minority shareholder, the management will share its profits with you, or at least invest them wisely.”
The long view
Long term is the key to Matthews Asia’s overall investment strategy in the region. As a result, Horrocks argues the new fund is a portfolio an investor would use as an expression of their exposure of Asia. He said it is not for an investor with an aggressively positive 12-month view on the region.
“Certainly in the US in the past few years, we have seen a move towards people having a more strategic allocation to Asia. In the UK there has been more contact with Asia from an investment point of view, and people are probably more comfortable with the separate allocation to Asia and growing that over time.”
