“We expect to open an office in the mainland, probably in Shanghai, in the next couple years,” Wheeler told International Adviser’s sister publication Fund Selector Asia.
“Initially it will be a research office. We already participate in the A-share market, so I would expect [a mainland office] will get us closer to those companies and help us to better understand the market. It will give us an opportunity to do on-the-ground assessments of companies.”
Although the A-share market is a small portion of Matthews Asia portfolios today, Wheeler expects that to grow.
“The investment team is spending an increasing amount of time assessing the market. They’re finding interesting ideas particularly in consumer staples and healthcare which have cheaper valuations than in other parts of Asia.”
Around 35% of the firm’s assets under management is in China. Matthews’ invests in the mainland through the Hong Kong Stock Exchange and through a QFII license, which allows foreign investors to buy or sell shares on China’s stock exchanges using a quota.
MRF consideration
Matthews’ Hong Kong office has client servicing and an analyst, but the portfolio management team and decision makers are based in the San Francisco headquarters.
The firm distributes its Ucits funds in Hong Kong. But products with a local domicile — part of the requirement for launching a fund through the Mutual Recognition of Funds (MRF) programme — are under consideration.
Wheeler said the firm is “exploring” the MRF, but currently the scheme is more interesting for China asset managers than for foreign firms. “You have to have some scaled product in Hong Kong to make it interesting for China-based investors.”
Additionally, “the average retail investor in China today is not a good match for us because we have long-term buy-and-hold strategies,” he said. “But the retail investors will evolve their behavior over time.
“Clearly the mainland’s financial and asset management industry is growing incredibly quickly and we are watching it closely.”
