Having set up a Hong Kong office just over two years ago, San Francisco-based Matthews Asia is steadily building its business there – with more products and hires planned this year – as it seeks to refine its distribution strategy for the region.
The fund manager's gradual progress reflects the challenges faced by new entrants to a region that is hugely fragmented and diverse, making it difficult to build scale and to keep on top of the various requirements across multiple jurisdictions.
Nor does it help that the rules around selling funds cross-border in Asia are in a state of flux, thanks to mooted initiatives such as the Asean funds passport and more recently the China-Hong Kong mutual-recognition scheme for funds.
One thing that should help Matthews on this front is its hire of compliance specialist Kai Chew in November as senior compliance manager for Hong Kong and Asia. Based in Hong Kong, he will address issues from fund registration to overall compliance with the rising tide of regulations in the region and globally.
A Mandarin speaker, Chew was previously vice-president of compliance at UniCredit Bank-HVB in London. He has also worked for firms including BlackRock and City of London Investment Management, as well as the UK's Financial Services Authority.
Matthews also plans to add two more staff – one sales and one marketing executive – in Hong Kong this year. It currently has a permanent headcount of three there, including James Campion, Asia head of business development.
Three other executives spend a considerable amount of time in the region, including Mark Lidstone, head of global marketing. He is working with the team in Hong Kong to develop a marketing strategy for Asia.
Meanwhile, staff from the US-based 35-strong investment team visit Asia four or five times a year to conduct company research, but Matthews has no plans to put investment executives there.
What it is doing is working on refining its distribution strategy for the region. At this stage Matthews' sales approach is focused on promotion of its Ucits funds in markets such as Hong Kong and Singapore. It is also keeping an eye on opportunities in Taiwan, hopes to access investors in Australia and Japan over time, and is seeking appropriate partners to collaborate with.
“The question after that is China, and how we'll gain access to it when it's more accessible,” says Bill Hackett, Matthews' CEO. He adds that the plan to allow Hong Kong-domiciled funds to be sold into mainland China is a potential “game changer”.
“Ucits will remain an important vehicle of delivery for the foreseeable future, but when you talk about China, you now need to consider what vehicle of delivery will be best suited for that market," Hackett told AsianInvestor while in Hong Kong last week.
The China-Hong Kong scheme may be closer to realisation than the Asia-Pacific or even Asean funds passport, but Hackett notes there's been no confirmation of when it will be put in place.
In the meantime, Matthews intends to add more Ucits products to the six Luxembourg-domiciled funds it already sells in Asia, including the Matthews China Dividend Fund, which launched at the end of January. The fund is not yet registered for sale to retail investors in Hong Kong, but products that are include the Matthews Asia Dividend Fund, Matthews Pacific Tiger Fund and Matthews India Fund.
Matthews' focus in the region is to develop relationships with private banks, independent financial advisers and insurance platforms. The firm’s 20-year history of working closely with financial advisers in the US is something it hopes to repeat in Asia, although they represent a far less powerful distribution channel in this region than across the Pacific.
Meanwhile, the fund house’s approach to institutional business in the region is selective and measured, says Lidstone; or some might say opportunistic. “We're having some conversations with a few institutions in Asia,” he adds. But for the moment Matthews' efforts are primarily focused on its range of commingled Asia products rather than segregated mandates.
The firm has a type 1 securities dealing licence, but has no plans at present to seek a type 4 (advisory) or type 9 (asset management) licence in Hong Kong, says Hackett, as the type 1 is sufficient to support the firm's activity for its Ucits and other products.
He adds that Matthews has focused on promoting its strengths as a specialist, pure-play boutique with a long history of investing in Asia, an approach he says has received a warm reception.
Hackett also cites the fact that the firm has around 45% market share of actively managed Asian funds in the US and a leading position on many US-based platforms for financial advisers and retail investors – attributes he says are appreciated by distributors in the region.