Fund name: Matthews Asian Technology (MATFX)

Objective: The fund seeks long-term growth of capital by investing in the common and preferred stock of companies located in Asia which derive more than 50% of their revenues from the sale of products or services in technology-related industries. For purposes of this fund, "tech" includes biotech, medical devices, pharmaceuticals and their distributors.

Adviser: Matthews International Capital Management. Matthews was founded in 1991 and has about $6.5 billion in assets in its eight (soon to be nine) Asian funds.

Manager: Mark Headley, Andrew Foster and Michael Oh. Headley is president of Matthews International and manages, or co-manages, seven of their funds. Andrew Foster is Director of Research and manages the India fund, as well as co-managing three. Michael Oh is the lead manager for this fund, a designation he earned earlier this year after five years as a research analyst for Matthews.

Opening date: December 27, 1999.

Minimum investment: $2500 for regular accounts, $500 for retirement accounts.

Expense ratio: 1.48% on an $80 million asset base.

Comments: Earlier this year, Roy undertook a search for The Next American Tech Fund Idol to replace a fallen idol in his own portfolio. The search lacked some of the high production values of American Idol (though Roy is considerably sharper than Simon Cowell) but carried with it much of the same sense of anticipation. In retrospect, it’s curious that the one fund no one – to the best of my recollection – touted was the star that outshone them all: Matthews Asian Technology.

While this may seem like a dangerously narrow niche, it’s worth recalling that the fund’s purview is 11 countries and better than half of the world’s population. Whether measured by number of PhDs earned, number of patents filed, or level of basic R&D spending, Asian nations are accelerating their commitment to tech at rates which dwarf ours. For example, the number of US patents filed by Asian scientists increased 750% in the ‘90s while the number of US-based patents rose only 116%, and the number of U.S. citizens earning PhD’s in the sciences is becoming an embarrassment. While Asian capital markets have, traditionally, been less transparent and efficient than the U.S. market – a crucial concern for international capital flows – it’s also clear that the Asian markets have been making important gains in those areas. You don’t have to be a fervent as Jim Rogers (the erstwhile Investment Biker and hedge fund guy has made sure that his young daughter is bilingual in Mandarin and English, has sold his New York apartment and is moving to an unspecified city in Asia to be close to where the future is) to recognize this as a legitimate field for investing.

And the Matthews folks have done really well there. Despite a disastrous first year (2000 – oops, bad time to be in emerging markets tech), the fund has outperformed every reasonable peer group. Ranked against U.S. tech funds, it has a string of top performances:

It has also topped the annualized performance of the S&P 500 for the past one-, three- and five-year periods by 13, 6 and 10%, respectively. And it has topped the average diversified Asia-Pacific fund (my surrogate is the Vanguard Pacific Index, which is actually well above-average) YTD, and for the past 1- and 5-year periods, though it trails a bit in the 3-year period.

Expenses are dropping, portfolio turnover is falling (now 30%), management is stable and respectful of their shareholders, the portfolio is compact . . . there’s a lot to admire here.

Bottom Line: if I were tempted by tech funds, I think I’d be particularly tempted by this one.

Fund’s website: http://www.matthewsfunds.com/the_funds/asian_technology/