Twenty years ago, Paul Matthews decided to launch two Asia ex-Japan mutual funds in the U.S. and create what is today the Matthews Asia Funds. One was a core Asia ex-Japan growth fund with a mid-capitalization bias. The other fund was a unique portfolio with a focus on Asian convertible bonds. Thus began the journey of the Matthews Pacific Tiger and the Matthews Asian Growth and Income Funds. 

Pacific Tiger may not have been unique, but it had a clear focus on the largely ignored mid-sized companies that floated between commonly held blue-chips and the speculative smaller companies. Asian Growth and Income (originally the Asian Convertible Securities Fund) was truly one of a kind, which sought to participate in the markets with reduced volatility. Most investors equated Asian funds with high growth and speculative trading. Funds were typically held for a year or two with an expectation of fast returns.

The previous decade had convinced Paul that the biggest challenge for investors was the habit of flocking to the markets only after periods of exceptional performance, then fleeing in the next inevitable sell-off. Buy high and sell low were practically a law for investors in the early days of Asian investing. The collapse of the Japanese market in the early 90s only reinforced this sense of trading rather than an investing environment. Asian Growth and Income Fund was launched as a solution to help reduce the intense volatility shaking out investors. 

Solving investors’ problems that they failed to realize they even had, is rare in the investment world. Promising glorious returns and failing to deliver is all too common. Paul offered a solution that proposed NOT trying to beat the markets, but aimed to modestly tame them. Focusing on the fear that drove investment decisions in markets that most foreign or local participants had little understanding of was a brilliant move. It took a number of years for more than a handful of investors to understand what Paul was offering. But when they did, they saw the opportunity for a reasonably low volatility, low correlation portfolio that helped solve the many challenges of global asset allocation. 

As I look back and consider the last 20 years, I wonder how far thinking has evolved. Investors are now flocking to exchange traded funds to try to time niche markets that some perhaps know little about. Few international investment strategies emphasize stability over growth. There is nothing wrong with a solid growth strategy. I spent the best years of my career running one (with Paul’s constant encouragement). But I was part of the pack, while Paul was out on his own, running ahead of us.

I never considered myself old enough to want such a strategy that aimed to reduce volatility, but as the kids grow up and my hair disappears, all I can say is, “Thanks Paul!”

Mark W. Headley
Matthews Asia

The strategy is designed to help the Fund to meet its investment objective while helping to reduce the volatility of its portfolio. There is no guarantee that an investment in the Fund will increase in value. The value of your investment in the Fund could go down, meaning you could lose money. For more information about our Funds, please visit Fund Overviews.

The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews does not accept any liability for losses either direct or consequential caused by the use of this information. Investing in small- and mid-size companies is more risky than investing in large companies as they may be more volatile and less liquid than large companies. 

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