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What's going on at the Matthews funds?

Global CIO & Pres Yu-Ming Wang is leaving after 6 months - Robert Horrocks will (again?) be CIO. August saw the departure of Tiffany Hsiao, who ran Matthews China Small Companies MCMSX and Matthews Asia Small Companies MSMLX & co-managed Asia Innovators MATFX/MITEX, and of Beini Zhou, who managed the about-to-close Matthews Value Fund MAVRX and co-managed Matthews Asia Small Companies and Matthews Emerging Markets MEASX funds (& has now turned up at Artisan.) As far as I can tell Asia Innovators and Emerging Markets each still have kept a manager, but the other funds are getting new leaders.

Comments

  • Numbers Gal: David discussed these departures in this month's Commentary. https://www.mutualfundobserver.com/2020/09/matthews-asia-high-profile-shuffle-limited-downside/

    Also, as of today, an Artisan spokesperson confirmed that Hsiao has also joined Artisan, but in what capacity, we don't know. The Barron's article is behind a paywall "'A Leading Money Manager for Asian Stocks Is Seeing a Big Exodus." You can probably read it via a private window.
  • I was invested in Tiffany's China Small fund earlier this year and sold to capitalize on some enormous gains. I was looking to invest again with her, but this time in the Asia Small fund, which she became lead on a few months back. I always enjoyed speaking with her to get an update on the fund and hear about what's going on in Asia - she is always exuberant and full of energy. Sad to see her go, but I assume she'll do something similar at Artisan?

    And I just found out about the Global CIO (what's difference wit CIO Robert Horrocks?) and President departing yesterday from FundFire! Has there been any explanation for his 6 month tenure? Fundfire mentioned two other executives, COO being one of them, also left this year after a very short tenure. President/Global CIO, COO and PMs all leaving in the span of 6 months. Feels like something is off? Big exodus sounds about right.

  • edited September 2020

    Here's a link to Matthews Asia's president/CIO resigning.

    https://www.pionline.com/money-management/matthews-asias-presidentglobal-cio-resigns

    Thanks Dennis. Still not much color on why he left. Timing seems odd. 3PMs all depart at same time, 2 other very senior execs leave a few months before after <2 years in their role. I'm back to the first post in this thread - what's going on over there? Might make sense to ask a lot of questions before investing in ANY of their funds.
  • Or it maybe time to sell ?!
    Stay Safe, Derf
  • edited September 2020
    Derf said:

    Or it maybe time to sell ?!
    Stay Safe, Derf

    Not a bad idea. Seems many others have been doing that as well. I just checked Morningstar. Matthews has had -$4bn of net outflows from their funds through 8 months ended 8/31/2020 YTD. That's quite significant since the firm only manages $24bn total. Perhaps investors had a sense of some of the issues before this announcement? This news will obviously not help things.
  • All of the quick departures are alarming. I'm babysitting some money for someone else, and part of it --- 10% of their total--- is in MAPIX. So far, its fund managers remain at the helm. I've re-read the M* analysis of the fund, dated in August. They love it. Best thing since sliced bread! Should we remain, or clear out? I'm pretty impressed by the numbers, too...
  • Crash said:

    All of the quick departures are alarming. I'm babysitting some money for someone else, and part of it --- 10% of their total--- is in MAPIX. So far, its fund managers remain at the helm. I've re-read the M* analysis of the fund, dated in August. They love it. Best thing since sliced bread! Should we remain, or clear out? I'm pretty impressed by the numbers, too...

    I'm not super impressed with Morningstar assessments. For example, analysts or co pms can leave funds and they somehow always seem to think that since the head/lead pm is still there, everything is fine. Quite often, its the underlings that do much of the grunt and analytics. And they never seem to hit on the qualitative stuff (why people left). But I digress.

    I looked at MAPIX earlier this year. Performance had struggled a bit over the last 12 months. IIRC, the 3-year return number was below the benchmark, which shocked me. It's since recovered some, but compared to other active funds in that category, Columbia Pacific Asia (USPAX) and Fidelity Pacific Basin (FPBFX) have superior return numbers for 1, 3 and 5 year trailing. I went with FPBFX as the return numbers were better and the expense ratio was 97 bps vs MAPIX 102 bps.
  • Not trying to pile on Matthews, because I don't currently own any of their funds, but another PM recently departed after co-managing the Pacific Tiger fund for several years. He was replaced by two people, one of whom had earlier been at Matthews but then spent a short while at Seafarer (leaving there under what looked like less than the best of circumstances). Matthews appears to be a fund company in flux right now.
  • Thanks for the replies. +1.
  • I don't currently own any Matthews funds (previously owned MAPIX and MAPTX).
    The recent spate of personnel turnover is very concerning.
    Does anyone know the true root cause?
  • edited September 2020
    sfnative said:

    Not trying to pile on Matthews, because I don't currently own any of their funds, but another PM recently departed after co-managing the Pacific Tiger fund for several years. He was replaced by two people, one of whom had earlier been at Matthews but then spent a short while at Seafarer (leaving there under what looked like less than the best of circumstances). Matthews appears to be a fund company in flux right now.

    You're right SFnative. Just googled and found the article below from April 2020. Two PMs actually not mentioned in the recent articles also left earlier in the year: Lydia So who was lead pm on the Asia Small Fund and had been with the firm for 15 years based on her linkedin, and Rahul Gupta who was co manager of Pacific Tiger fund (this is the one you referenced) both left the firm in April 2020. Tiffany Hsiao actually took over Asia Small when Lydia departed before leaving herself a few months later.

    So that's 5 very senior PMs departing in the span of 6 months, plus the President/Global CIO, COO and CHRO. I see smoke!

    https://citywireusa.com/professional-buyer/news/fund-files-matthews-managers-depart-invesco-fund-under-review-after-index-error/a1354995

    https://www.linkedin.com/in/lydia-so-cfa-b9b0171b3/

  • Take a look at Fidelity Emerging asia. Provides exposure to China and other key Asian emerging markets like India but that is balanced out by holdings in Japan. The portfolio manager has a stong background as a technology analyst and thus both tech and communication services are well represented. What I really like is the consistency of the fund. It rates in the top 10% of its category for the past 1, 3 , 5 and 10 year periods. I plan to add it right after the election. Here is the report from morningstar..

    Fidelity® Emerging Asia (FSEAX) Performance | Morningstar
    https://www.morningstar.com/funds/xnas/fseax/performance
  • My only Matthews fund was MEGMX, although I had been strongly committed to their funds several years ago. I decided to take good profits and put them into ARTYX. I was concerned about all the turnover of managers, then the news of the outflows pushed me to sell.
  • BenWP said:

    My only Matthews fund was MEGMX, although I had been strongly committed to their funds several years ago. I decided to take good profits and put them into ARTYX. I was concerned about all the turnover of managers, then the news of the outflows pushed me to sell.

    Interesting. Didn't they just launch MEGMX?


  • Inception Date Apr 30, 2020 as / Yahoo
    Stay Safe, Derf
  • Yes, I was intrigued at the inception of MEGMX about Matthews’ chances with a diversified EM fund with new management. I decided to take a position in it and at the same time commit to ARTYX, in hopes that EMs would recover. Both positions made great moves up, with the Artisan fund doing better. The turmoil at Matthews and the apparent success of Artisan in attracting new talent led me to sell MEGMX but keep my EM allocation by increasing my position in ARTYX. I’m impressed that Artisan poached Lewis Kaufman (2015) and Reno Kanovich (2018) and got people from Matthews to come back. David Snowball’s commentary this month suggests that Artisan has concrete plans for future expansion.

    Asset managers as businesses may face rocky roads ahead. In fact, from its IPO in 2013 until the present, Artisan Partners stock hasn’t seen any appreciation. While it’s hard to draw conclusions from the last 12 months or so, Schwab’s stock has disappointed at a time when the company has expanded its asset base. Personally, I am drawn to small MF firms for my actively managed holdings. Therefore, I own funds at Artisan, DF Dent, Brown Capital, Brown Advisory, and Grandeur Peak. With the exception of GP, I use Schwab for our Roths and taxable MF accounts. I just recently decided to part ways with the Bruce Fund, in part for the purpose of consolidating accounts. The redemption check arrived quickly enough via the USPS, but BOA has placed a 10-day hold on my deposit. Shades of “Hotel California.” Needless to say, investing in a boutique MF company that has no presence in the fund supermarkets has its drawbacks.
  • As Derf notes, Matthews Emerging Markets (MEGMX) is just six months old. It has seen consistent inflows and is sort of clubbing the competition: up 32% since inception versus 20% for its peers in the same period.

    Matthews Emerging Asia (MEASX), on the other hand, has had a harder time with three lean years and a couple years of outflows, though the management team has remained unchanged.

    I had a chance to chat with some of the Matthews reps. They're a bit concerned that headlines ("Exodus!") will override the substance of the stories: a couple really good managers (and their seconds) moved took plum positions elsewhere, a less excellent manager might have been replaced, and cancelled business initiative in China might have displaced another, all of which is pretty normal in the industry. They admitted to not knowing much about the administrative departure, but promised to try to find out.

    For what that's worth,

    David
  • edited October 2020
    To David's point, in my experience only about 1/3 of headlines journalists write are actually kept in the published article, including I would add in this "Exodus" case. Headlines are re-written for SEO or search engine optimization. Clicks are vitally important for pubs to survive, and sensational headlines with the best SEO words get the most clicks. Such is life in a post-Google era.
  • M* calibrates the outflows on a fund family basis. In 2017 Matthews managed $29.6B and in 2020 assets are down to $20.5B while the number of funds during that time period did not change. The people leaving may not constitute an “exodus,” but the AUM decline is enough to shake my confidence. Investors who remain in funds that are losing assets often get stuck with a nasty tax bill year end.
  • edited October 2020

    As Derf notes, Matthews Emerging Markets (MEGMX) is just six months old. It has seen consistent inflows and is sort of clubbing the competition: up 32% since inception versus 20% for its peers in the same period.

    Matthews Emerging Asia (MEASX), on the other hand, has had a harder time with three lean years and a couple years of outflows, though the management team has remained unchanged.

    I had a chance to chat with some of the Matthews reps. They're a bit concerned that headlines ("Exodus!") will override the substance of the stories: a couple really good managers (and their seconds) moved took plum positions elsewhere, a less excellent manager might have been replaced, and cancelled business initiative in China might have displaced another, all of which is pretty normal in the industry. They admitted to not knowing much about the administrative departure, but promised to try to find out.

    For what that's worth,

    David

    David, thanks for the comments. All true, however, I do not find it common for a CIO to stay only 7 months since being brought on to presumably turn around the performance, which has really taken a nose dive in the last 3 years. Pacific Tiger and Asia Dividend, two of the largest funds, are both less than 50th percentile compared to peers 3-year trailing return. I presume the CIO was brought on to fix that performance, which seemingly never happened as the returns as of August were still poor versus competitors.

    In addition, losing someone like Tiffany, who is a great fit for a firm like Matthews, is quite shocking. How did they not retain her? And why did they all leave at the same time? 5 PM departures in the span of 5 months, and all of them were up-and-coming PMs. Dare I say next generation leaders.

    Lastly, executives departing < 15 months is weird. I have long been investing in boutiques, and can tell you this is not normal at all. I get retreating from China, but surely a COO does more than just china expansion, no? If not, why did they hire them?

    That against the backdrop of huge outflows...something smells funny. Either these departures are just shockingly coincidental, or something seems broken internally. And yes, MEGMX seems to be off to a roaring start, however, Mr. Zhang was a co-lead on that and he just left. So, how does one think of that performance without him there? Worst case scenario: he was the driver of much of the returns! Regardless, I try and not get too excited with such a short track record. There are alot of good emerging markets managers, Baillie Gifford and Ashmore are two from Europe that have been building good track records over here.
  • edited October 2020
    Has anyone heard anything about Tiffany Hsiao and an EM or Asia fund at Artisan? I actually called them and asked. However, they were mum on any details, which is not unexpected.
  • edited October 2020
    @ProtonAnalyst33,

    I like Baillie Gifford as an investment firm.
    The firm is privately owned, their funds are team-managed with reasonable expenses, and fund performance is often good. I previously owned BGEGX via Fidelity. I believe Baillie Gifford's distribution agreement with Fidelity has lapsed. Baillie Gifford is a subadvisor for several Vanguard funds although I don't believe they are the sole subadvisor for any of these funds.
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