The Matthews China Dividend Fund provides investors with an opportunity to gain exposure to a portfolio dedicated exclusively to investing in Chinese dividend-paying companies, the firm said in a statement. While the Matthews China Small Companies Fund gains exposure to a portfolio dedicated exclusively to investing in Chinese small companies.

China Dividend Fund

The Matthews China Dividend Fund seeks companies that are well-positioned to grow future dividends while providing an attractive dividend yield. In designing the fund, Matthews said Asia Pacific has evolved into one of the premier regions for investors seeking growing dividends and yield.

The universe of dividend-paying companies in Asia Pacific - and in particular China - has expanded significantly. Over 840 Chinese companies paid dividends in 2011, compared with about 240 companies in 1998. Total dividend payment increased from about $8 billion in 1998 to more than $72 billion, according to the statement.

The Matthews China Dividend strategy has been available to investors in the US since 2009, and delivered a three-year annualised return of 9.85 per cent versus a benchmark return of 0.77 per cent as of 31 March2012).

The new UCITS fund will follow the same investment approach and is managed by the same team of Yu Zhang, CFA, and Jesper Madsen. The same team also oversees the Matthews Asia Dividend strategy, which launched in 2006 in the US and in 2010 as a Luxembourg-based UCITS fund.

“China’s capital markets initially attracted investors for the growth potential but the country’s equity markets have evolved significantly over the past 10 years such that they have become among the largest and fastest growing markets in Asia in terms of dividend payments,” said Yu Zhang, lead portfolio manager.

“We now have the ability to invest in a growing universe of dividend-paying companies offering both attractive current yields as well as the potential for future dividend growth,” he continued.

Jonathan Schuman, head of global business development added: “We believe dividends represent an important part of an investor’s total return and in today’s low-yielding environment, there continues to be strong demand for funds that can deliver a higher level of income. We are therefore pleased to offer this new fund, which will invest in Chinese companies that have attractive dividend yields and the potential to grow their dividends over the long term.

China Small Companies Fund

According to the firm, the Matthews China Small Companies Fund will seek long-term capital appreciation by investing in the stocks of companies in China, Hong Kong and Taiwan with market capitalisations generally under $3 billion. The number of publicly listed small Chinese companies has nearly doubled in the past five years and now exceeds 1,000. Managed by Richard Gao, and co-managed by Henry Zhang, CFA, the fund represents the firm’s third dedicated China strategy.

The firm’s other China offerings include the Matthews China and Matthews China Dividend Funds.

The Matthews China Small Companies strategy has been available to investors in the US since 2011. The UCITS fund will follow the same investment approach and is managed by the same team of Gao and Zhang.

“While large state-owned enterprises have long dominated China’s investment universe, we are seeing small companies benefiting from the country’s shift to a market economy. Matthews has a long history of investing in China and in our experience, investing in the initial stages of a company’s growth has the potential to be very rewarding. Small companies often provide opportunities for higher growth at lower valuations," Gao said. 

Robert Horrocks,, Matthews Asia chief investment officer added: “In our view, the world’s most populous country is an asset class in itself and affords the opportunity to pursue a variety of strategies. We are excited to be able to offer a new strategy with which investors can access China’s rapidly expanding universe of small companies.”

As of 31 March, Matthews Asia had $23.8 billion in assets under management and 13 investment strategies.