Matthews Asia is navigating a difficult interval. Based 30 years in the past by Paul Matthews, the agency achieved a uncommon trifecta: constantly excellent risk-sensitive returns throughout all the fund household, excellent success, such because the as soon as $60 million AUM agency touched the $36 billion mark, and large skilled respect because the nation’s premier Asian investing specialist with a strong inside tradition and deep bench.
The Matthews Asia of 2025 feels a good distance from that success.
Belongings have plummeted from $36 billion to $6 billion. Efficiency is blended at greatest, with solely three or 4 of 12 funds having above-average or greater risk-adjusted returns over the previous 5- or 10-year intervals. One thing like half of the funding crew has left the agency, some strolling away and a few pushed out. Considered one of Morningstar’s most senior analysts, William Samuel Rocco, crystallized the priority:
The agency has suffered from excessive personnel turnover all through the 2020s, and it has misplaced 15 members of its funding crew in the course of the previous two years, together with a former CIO/portfolio supervisor and different key people. The agency has employed Sean Taylor as a CIO/portfolio supervisor and added one other portfolio supervisor prior to now two years. There are actually 18 people…on the funding crew…However there have been 31 people on the funding crew in mid-2023 and 38 in 2020. Furthermore, Cooper Abbott left the agency in April 2025, lower than three years after becoming a member of the agency as CEO.
Matthews has changed Abbott with Mark Headley, who had ample success [in several roles at Matthews before his retirement]. However Headley, Taylor, and their colleagues have daunting challenges to deal with. A lot of the agency’s methods have posted blended, or worse, returns in recent times, and buyers have pulled property away.
We spoke with Mark Headley in June 2025. When requested in regards to the suggestion that Matthews had misplaced its manner, his response [I’m paraphrasing here] was: “Yep, just about.”
In an hour-long dialog, we pursued two questions with Mr. Headley: (1) what went flawed? and (2) is it fixable? The shortest [still paraphrased] model of his solutions: (1) We screwed up our inside tradition to the extent that it stopped producing good outcomes and (2) I’m fairly certain we will. “There are nonetheless good bones there.” We’ll know inside three years.
What occurred to Matthews’ tradition? There have been two modifications, sophisticated by a 3rd issue.
Change one: they received too large and maybe received a bit stuffed with themselves. Within the mid-2010s, all the things labored: cash was pouring in, efficiency was perking alongside, funds grew, the crew grew, and salaries grew. However someplace in there, id was misplaced. By Mr. Headley’s estimation, a 40-person funding crew just isn’t “a crew,” it’s at greatest a bunch of proficient, aggressive folks occupying the identical area. They have been a set of groups, not a single crew, and that made an enormous distinction. Collaboration decreased, cooperation fell, silos arose, and groups noticed themselves in competitors with each other for assets and a focus. The entire grew to become weaker than its particular person elements.
Change two: management stopped main. Constructing and sustaining cultures is arduous. It takes a really distinctive set of abilities to tug it off: a mindset that loves problem and is keen to problem others, a mindset that asks “the place will we should be in 5 years and what do I have to do this week to maneuver us in that path?” (If you happen to ever marvel in regards to the elementary flaw in Karl Marx’s considering, that is it. He by no means valued the mental work of “the capitalist class,” who organized, strategized, and supported “the working class.” He noticed anybody amassing a paycheck however not engaged on the manufacturing facility flooring as useless weight. They aren’t.) Arguably the management grew to become extra laissez-faire, hiring proficient folks however not taking accountability for his or her development, not holding them liable for their actions (for instance, not calling out a triple-digit turnover ratio in a buy-and-hold portfolio) and never contemplating all the vary of abilities required (together with communication abilities and the flexibility to get folks excited in regards to the technique) of their personnel choices. The retreat into silos meant that the groups, and the management, not took time to evaluate the macro-level forces shifting all the world.
The affect of funding professionals waned as portfolio managers retreated into silos, and the affect of gross sales and advertising and marketing grew. That’s not often factor for the reason that comprehensible impulse of a gross sales crew is to supply extra of no matter is at the moment sellable.
The wild card issue: Xi Jinping upset the entire management’s earlier assumptions. The agency at all times counted on China, nevertheless flawed that now appears, to maneuver steadily and relentlessly towards turning into a rational financial actor. Mr. Xi, as a substitute, reasserted higher centralized management. These developments weakened the case for “Asia” as a definite asset class. Reasonably than a definite world driver, buyers started considering of Asia as only one a part of the rising markets puzzle. Belongings then shifted from Asia-centered funds to these with broader mandates.
Can Mr. Headley repair it? He thinks so. His easiest metric: if Matthews can attain round $12 billion AUM inside three years, they’ve gained.
Mr. Headley begins with a special perspective than most. He doesn’t wish to return to the glory days. He doesn’t need 35 or 40 portfolio managers within the constructing. He doesn’t need a regular stream of latest “merchandise”. He doesn’t need $36 billion in property. He doesn’t imagine that any of these are sustainable states for a mission-centered boutique supervisor.
Extra sustainable: $10-12 billion in property, 20 or so funding professionals, a willingness to see Asia in its bigger context, and maybe fewer funds than they handle now. Additionally necessary is to convey stability again to its funding crew, led by Sean Taylor, who has over 30 years of expertise in rising markets, or, the place essential, usher in some new expertise.
His plan, as far as I perceive it, is (1) to have a look at all the things with contemporary eyes and (2) to rebuild a profitable tradition. The “have a look at” half contains an evaluation of what works, and what’s been limping alongside, what’s central and what’s merely a distinct segment, and, most significantly, who they’ll construct round. That’s, who on the employees has the entrepreneurial mindset, ardour, and communication skills that may enable them to champion their very own methods and, ultimately, to steer the agency.
The “rebuild” half comes right down to instructing portfolio managers that failure is inevitable and never shameful; you shouldn’t cover it, you might want to study from it. Partly, that requires proudly owning up, speaking by, and strategizing. All of which is a few mixture of alien and scary. A part of Mr. Headley’s job is to make it regular once more. A part of the cultural rebuild is re-engaging with macro components, permitting a top-down imaginative and prescient that enhances bottom-up safety choice. With out the top-down, a supervisor dangers creating an obsession with choosing up pennies in darkish alleys. Lastly, folks should be held accountable for his or her choices.
Backside line
I agree with Mr. Headley, “there stay good bones in there.” We got here away from our interview with a number of robust impressions. First, Mr. Headley could be very good, very assured, and really aggressive. Profitable is in his DNA. Second, Mr. Headley did it earlier than, serving to information a $60 million agency to grow to be a $30 billion one. Third, he’s keen to ruffle feathers as the mandatory value of enchancment. He doesn’t appear headstrong however does appear to have a transparent sense of what success calls for. He’s betting {that a} vibrant inside tradition and deep regional experience – fairly than index-hugging breadth – will win purchasers in search of long-term publicity to the world’s fastest-growing economies.
I’d not guess in opposition to him.
