Better Know a Fund Manager

Welcome, Fools, to part 10 of our several-thousand-part series, "Better Know a Fund Manager," which is loosely (but not too loosely) based on Stephen Colbert's "Better Know a District" from The Colbert Report.

Like Stephen and his thorough investigations into America's congressional districts, each week I take a look at a fund you may want to own. What's on tap this week?

Matthews Asian Growth & Income (MACSX)

Expense ratio

1.27%

Fund size

$1.8 billion in assets

1-year return

18.16%

5-year return

19.12%

10-year return

12.92%

Source: Matthews Funds

Meet G. Paul Matthews
The fightin' team at Matthews Asian Growth & Income is led by G. Paul Matthews, who has been investing in Asia since 1982. And I'm not talking about weekly visits to the local noodle palace, either. (Though, come on, that can't hurt, can it?)

Matthews is an expert on the economies of the Asian tigers, including South Korea, Singapore, and Taiwan. Blame his British upbringing. A Master's graduate of Cambridge University -- harrumph! -- Matthews told Investment Advisor magazine in 2002 that he earned a taste for Asian investing while living in Hong Kong from 1982 to 1988.

By 1991, Matthews International Capital Management was a sprawling operation in the heart of San Francisco's financial district. By September of 1994, Matthews was the newly minted manager of Asian Growth & Income and Matthews Pacific Tiger (FUND: MAPTX  ) . Three months after that, he'd add Matthews Korea (FUND: MAKOX  ) .

Seeking Seoul would haunt him less than two years later, however. That's when the stockinistas at BusinessWeek called him the worst stock fund manager of 1996. Apparently the weak-kneed crowd in the newsroom couldn't stand the 26% loss the fund had suffered that year. Whoops. Since those dark days, Matthews Korea has become one of the best performing Asian funds available, pummeling its category peers over six of the last nine years. Eat that, Wall Street.

How he invests
It's not exactly easy to pin down Matthews' style. On the one hand, he speaks like an economist. On the other, he proclaims a focus on "bottom-up" investing, in which he and his team seek firms with diverse and growing support from local investors.

Morningstar isn't much help, either. It classifies Growth & Income as a "Pacific/Asia" stock fund that excludes Japanese stocks. Ooooookaaaaay. More telling is Matthews' most recent investor report and the accompanying letter to shareholders. There, Matthews explains that the fund may invest up to 80% of its net assets, including some leverage, in dividend-paying stocks and convertible bonds. Call it the investing equivalent of lemonade with a splash of vodka.

Perhaps that's why Growth & Income today holds 26% of its assets in bonds and higher-risk convertible securities, including spicy plays such as the 1% 2011 bond of India's Tata Motors (NYSE: TTM  ) .

Is this fund for you?
Ready to cast your lot with Matthews? Not so fast, Fool. Growth & Income is closed to new investors. So is Pacific Tiger, which Motley Fool Champion Funds advisor Shannon Zimmerman recommended to subscribers with superb results. (And it isn't Shannon's only stellar pick; try the service free for 30 days to learn more.)

Luckily for you, the Korea Fund isn't. That's right; the $261 million fund that helped Matthews skunk the crybabies at BusinessWeek is open to new money. Just remember that Seoul searching can be painful, and turbulence in Asian markets -- especially the Korean KOSPI -- can produce gut-wrenching volatility. That Matthews has loaded up on highfliers such as NCSoft won't smooth the bumps, either. Fortunately, Matthews Korea also sports needed ballast in stalwarts like Kookmin Bank (NYSE: KB  ) and SK Telecom (NYSE: SKM  ) , which ought to provide more than enough balance to keep the value huggers sobbing for a few years more.

And that's this week's profile. See you back here next Thursday, fund nation. Good night.

Think you can't beat the market with funds? Think again! The selections in Shannon Zimmerman's Motley Fool Champion Funds portfolio are up an average of 17% vs. just 7% for their comparable benchmarks. Ask us for an all-access pass to get an unfettered look at all of Shannon's picks, manager interviews, and model portfolios. Go ahead; it's free for 30 days and there's no obligation to buy.

Fool contributor Tim Beyers is a regular viewer of The Colbert Report. (Stay the course.) Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what else is in Tim's portfolio by checking his Fool profile. The Motley Fool has an ironclad disclosure policy.


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