The experience of working with Robert Horrocks can be a little short on glamour. Just ask the other money managers who traveled with him on a fact-finding trip for the Matthews Asia funds early this year. In a three-week stretch, the team logged some 80,000 miles through seven countries, investigating more than 150 companies. Instead of tasting Asiaâ??s famed street cuisine, managers were more often downing fast food in their cars. And for every Asian Tiger metropolis they visited, there were plenty of grungy industrial outposts and sleepy villages. Ningbo, China? Check. Sehore, India? Been there, bought the T-shirt.
But that slogging detective work yielded exactly the kind of intelligence the Matthews team prizes. One managerâ??s four-and-a-half-hour driveâ??sandwiched among a convoy of erratically driven trucksâ??turned up an unexpectedly high-tech apparel plant in China; another trip revealed that a promising auto factory was getting by on Reagan-era equipment (a deal breaker).
For these managers, the miles and years are adding up. Launched in 1991, Matthews International Capital Management is one of the oldest U.S. mutual fund firms dedicated to Asia. It manages $11.6 billion, and a $10,000 investment in its best-known fund, Matthews Asian Growth & Income, would have more than tripled over the past decade, to $37,000. Horrocks now presides over the firmâ??s overall strategy as chief investment officer, overseeing its stock pickers as they process their findings in San Francisco. â??Itâ??s not a piece of inspiration or blinding insight you get,â? says the 42-year-old Englishman. â??We have the same information as everyone else, but our framework is the next 10 years, not 10 seconds.â? Indeed, the firm often hangs on to stocks for yearsâ??upwards of a decade in the case of SK Telecom and Samsung Electronics, which have more than quadrupled since the firm first bought them in the mid-1990s.
For now, though, Matthews and Horrocks are clawing their way out of the wreckage of the financial crisis. Although seven of the firmâ??s funds beat their peers, they all suffered double-digit losses in the crashâ??the funds as a group are still down about 2 percent from their 2007 peaks, according to Morningstar. Those losses stress-tested a team already grappling with the illness of longtime chief investment officer and current chairman Mark Headley. In 2008, as markets hit their worst patch, Horrocks came aboard as director of research, after years of helping investment firms set up teams and strategies in Asia. Headley says Horrocks improved the firmâ??s stock picking with an intensely numbers-driven approach to analysis, â??taking us from an X-ray view to an MRI.â?
Horrocks took over as investment chief last July. While fund analysts are often wary of investment firms that have just passed the leadership torch, the deep bench at Matthews eased those concerns. â??They are like the Orville Redenbacher of Asian investing,â? says John Eckel, president of advisory firm Pinnacle Investment Management. â??They do one thing and do it better than anyone elseâ??so it doesnâ??t matter who is at the helm.â? Horrocksâ??s Asian expertise is practically lifelong: Having grown up in northeast England with a father fond of Chinese cooking, he first lived in Beijing in 1987, studying modern Chinese barely a decade after the Cultural Revolution. He spent the better part of 15 years in China, Hong Kong, Taiwan and Korea, as he finished a doctorate in Chinese economic history. That gave him a front-row seat to observe the changing Asian householdâ??a theme that guides much of the strategy at Matthews.
Today Horrocks has a front-row seat at what some think is an overheated market. Fund investors have plowed $50 billion into Asian stocks since the beginning of 2009, according to research firm EPFR Globalâ??with $3 billion of that going into Matthewsâ??s fundsâ??as investors bank on countries like India and China to drive global growth. But lately, China has reined in lending and raised bank reserves to curb inflationary pressures, and manufacturing data suggests that growth is slowing. â??Investors could be getting into a debt-fueled bubble, but no one is paying attention,â? says Simon Johnson, former chief economist at the International Monetary Fund. And with data from Asian economies often unreliable, even Matthews managers are quick to note they donâ??t expect a smooth path.
We sat down with Horrocks in a conference room overlooking Treasure Island in the San Francisco Bay to get his take on Chinaâ??s future, where the next decadeâ??s treasures lie in Asia, and how he became the firmâ??s resident pool ace.
SmartMoney: Are peopleâ??s expectations for China too rosy?
Robert Horrocks: If they expect 10 percent economic growth, expectations may be a bit ahead. But valuations are not overly exuberant, and most of the talk lately is about unsustainable booms, so there is a reasonable amount of skepticism. In January one of my concerns was that investors would get overhyped about Asia, but people are sober now.
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