Asia PacificAug 7 2017

Interview: Robert Horrocks on Mandarin to Matthews Asia

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Interview: Robert Horrocks on Mandarin to Matthews Asia
“It’s always difficult in the UK when you are the new kid on the block as you have to get people to know you”

Mr Horrocks took something of an abstract route into the industry by studying Mandarin at university. “At school I always liked languages, and I was better at French. But if you did French at university you’d end up studying 17th century romantic French poetry or something, which is just not my thing.” 

Instead, he chose the Chinese language, although he initially failed to gain a foothold as his course ended around the same time as Tiananmen Square and China closing itself off. Mr Horrocks opted for postgraduate study and then became a stockbroker in Hong Kong analysing Chinese B-shares. 

He recalls: “I learned after a while that the salesmen called me Dr Doom or something similar. The reason was that I was analysing 25 companies and I had one buy and 24 sells. You could tell with a lot of these firms that they weren’t cut out to succeed. Competition was too fierce, or the quality of management wasn’t there, or they were state-owned businesses.

“I was taught that the first question to ask is ‘how’s business?’ I had one company where I sat down with the chief executive and he shook his head and said, ‘if it keeps going like this we’ll be bankrupt by June’. So that was another one for the sell list.” 

Mr Horrocks then moved back to the UK to join Schroders, and spent some time as a UK analyst before being transferred to the Far East desk. He later spent time in Taiwan, South Korea, Shanghai and Hong Kong before being approached in 2008 for a job at Matthews Asia. 

“I got a call from a recruiter who said there’s a company in San Francisco looking for someone like you. Having spent 10-12 years in Asia, I immediately [thought] why San Francisco? Why would I bother with San Francisco?” 

But Mr Horrocks was attracted by what he describes as a measured and thoughtful culture. “Later I learned it’s being in San Francisco which allows that culture to flourish. It’s not that you can’t do it in Asia, but when you specialise in Asian markets – and they can be volatile, plus the fact you have to take a long-term strategic approach – it’s often easier to do with a little bit of distance,” he says.

Originally joining Matthews Asia as head of research, a decision by the acting CIO at the time to step back led to Mr Horrocks taking on the role. “I couldn’t at that time, and still cannot, conceive of a better job to be in,” he adds. 

The company has recently looked at expanding by building on its foothold in the US and trying to diversify the client base in Latin America, Asia and Europe. 

“While Matthews is a reasonably well-known name in the US, it’s an unknown name [in the UK]. But to get the sort of acceptance that we’ve seen from UK investors, and to start getting seen as somebody who has a unique way of looking at Asia, is very exciting.”

Mr Horrocks admits in the UK it is “always difficult when you’re the new kid on the block as you have to get people to know you, so there’s a lot of working on meeting people and telling a story and trying to reinforce that”. 

But he adds: “I do get this feeling that we speak the same language. Matthews was set up by an Englishman and there’s a certain Englishness about the company and about how we go about investing in Asia. We try to understand it and take long-term strategic views. That way of thinking gels quite well with a significant number of people in the UK. 

“We can share a view of Asia and how we implement our investment philosophy, but we don’t have to explain Asia as it doesn’t seem that foreign to UK investors.”

In contrast, he says one of the biggest challenges was moving from “where nobody questions the validity of Asia” to the US, where he believes people are generally very sceptical and pessimistic on the region, and particularly China. 

“[That’s] definitely been the hardest thing. I do find myself sometimes being defensive, but I try to keep a balanced view of Asia,” the CIO says. 

“We don’t want to be a cheerleader, but sometimes we’re forced to defend it as a region, as a concept and as an economy. There’s this idea that China’s growth has somehow been fake. I spend a lot of time explaining what China used to be like when I lived there as a student in 1987.”

Mr Horrocks says that back then the idea of going to a restaurant for a meal was uncommon. Most people ate in worker canteens, while shopping was limited with most people buying their coats from surplus stores. 

“With the differences that have been wrought in Beijing, you can now see restaurants and coffees shops everywhere, [along with] cinemas, fast food, entertainment and casual bars,” he says. “People dress in very individualistic stylish ways. The idea that this growth is somehow fake is to me an horrendous misconception.”

As a result he notes the macroeconomic environment and focus on Asia can be a double-edged sword. “You find yourself talking a lot about the macro, and the difficult side of that is we’re not a macro house. Everything is geared about finding the right businesses. There are sectors where we have more investments and the same with countries, but that’s because they have more businesses that we like,” he explains. 

“The plus side is that by being an Asian specialist and being bottom-up, when we talk about the macro we can be a lot more open about the flaws that we see. What it allows us to do, and what we do particularly in the US, is to add a little bit more nuance to the conversation. I think that adds value to clients. At least I hope it does.”

Looking ahead, Mr Horrocks notes that economic growth in the region seems strong, with the difficulty being that corporate earnings have not kept up with that growth. 

“What we’ve seen in Asia in the past five years is a divergence between the underlying economic growth, which has been good, and corporate earnings growth, which has been non-existent. I suspect they’ll start to move much more in tandem in the years ahead,” he says.

“It looks more optimistic than it has done for a while. The caveat is valuations, which may look expensive in the global context, but while they’re not outright cheap, they’re reasonable. And of course you want to see that the general global economy can continue to tick along. Asia as a region is still going to feel the impact of any slowdown in the global economy.”

Looking ahead for the business, Mr Horrocks says the focus continues to be reaching new clients. “When we had this plan of diversification, the way we phrased it was if we don’t add a single new dollar of clients’ assets under management, but we diversify clients by type and geography, then we’ve added value to the company.”

In terms of new funds, he says “never say never”, but adds: “There’s nothing in particular we need to do. We have a range of strategies with one underlying philosophy, which is long-term, bottom-up investment in quality growth companies. We then split that out into essentially those we invest for higher rates of growth and those that pay out dividends to give a slightly less volatile portfolio.” 

He continues: “We do that in single countries: small cap and all cap. There’s no reason to launch more products or new strategies at this point.”

 

CV

Robert Horrocks

2008 – Present

Head of research, Matthews Asia.Named CIO in 2009

2006 – 2008

Head of research, Mirae Asset Management, Hong Kong

2003 – 2006 

CIO, Everbright Pramerica, China

1998 – 2003

Taiwan country general manager – deputy CIO in Korea and designated CIO in Shanghai – Schroders

1995 – 1998

Analyst, Schroders

1994 – 1995

Research analyst, WI Carr Securities, Hong Kong