Andrew Foster, the ex-CIO of Matthews Asia, has just launched the Seafarer Overseas Growth and Income Fund. It will be an emerging markets focused fund with a heavy skew towards Asia.
Structured as a no-load mutual fund, it will invest in equities, convertibles and fixed income securities. Moreover, it will invest not only in emerging market securities, but also those from developed markets that benefit from emerging market growth.
According to Foster, the fund aims to “get the growth that is coming from emerging markets even if that comes from a developed markets source”. Within an Asian context, that means investing in companies from Japan, Australia, Hong Kong and Singapore even if they technically have a developed market status from the index providers.
It will also invest in frontier markets, especially those in Asia. “Vietnam will be the main one,” says Foster. “I believe strongly that investors should pay attention to Vietnam over the next 5-10 years. Overall the fund will have a strong Asian orientation as China is still the market to watch,” he says.
In terms of sectors, the fund will look at the emerging service sector in Asia as well as the already well-bought consumer plays. Companies in the logistics, transportation, media and health-care sectors will feature heavily. By investing off the sectors and countries tracked by the indices, the fund hopes to take advantage of the opportunities that are generated by passive investors.
The fund has two share classes, an investor class and an institutional class. Both are without any embedded loads or commissions. Seafarer Capital Partners will cap annual expenses on the two classes at 1.60% on the investor class and 1.45% on the institutional via contractual arrangement. The minimum investment for the former s is $2,500 (or $1,000 in a retirement account) and for the latter $100,000.
The fund is open-ended and strikes an NAV each day the NYSE is open, and has no lock-ups or minimum holding period requirements before redemptions can be processed, although holding periods less than 90 days will incur a redemption fee.
The fund will be benchmarked against the MSCI Emerging Markets Index, although will not track it. By investing in an array of securities, the fund aims to get both long-term capital appreciation as well as current income. This unconstrained and flexible approach mirrors the strategy that Foster followed while managing Matthews’ flagship Growth and Income fund.
Foster left Matthews a year ago to set up Seafarer. Based in San Francisco, Foster counts some of his old colleagues at Matthews as some of his earliest investors.
For the rest of the year, Seafarer will concentrate on building a US distribution and marketing presence before targeting institutional accounts in Asia next year. “We have ambitions to market this in Asia within the next 12-18 months, but first we need to get the US bedded down,” he says.