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Asia Growth

Matthews Asia ESG Fund MASGX

Snapshot
  • Unconstrained strategy focused on companies that make a positive environmental, social and eco­nomic impact in Asia ex Japan
  • Deep bottom-up fundamental approach with bias toward mid- and small-capitalization companies whose ESG qualities are less appreciated
  • Seeks to generate attractive long-term risk-adjusted returns by investing in well-governed companies

04/30/2015

Inception Date

-9.82%

YTD Return

(as of 06/27/2022)

$13.86

Price

(as of 06/27/2022)

$132.88 million

Fund Assets

(as of 05/31/2022)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Asia ESG Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies of any market capitalization located in Asia that Matthews believes satisfy one or more of its environmental, social and governance (“ESG”) standards. The Fund seeks to invest in companies across the market capitalization spectrum that Matthews believes to be undervalued but of high quality and run by management teams with good operating and governance track records. In addition, the Fund seeks to invest in those Asian companies that have the potential to profit from the long-term opportunities presented by global environmental and social challenges as well as those Asian companies that proactively manage long-term risks presented by these challenges.

Risks

Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. Matthews Asia ESG Fund’s consideration of ESG factors in making its investment decisions may impact the Fund’s relative investment performance positively or negatively.

These and other risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 04/30/2015
Fund Assets $132.88 million (05/31/2022)
Currency USD
Ticker MASGX
Cusip 577-130-727
Portfolio Turnover 65.6%
Benchmark MSCI All Country Asia ex Japan Index
Geographic Focus Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region
Fees & Expenses
Gross Expense Ratio 1.20%
Net Expense Ratio 1.40%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 05/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia ESG Fund
MASGX
4.02% -3.58% -12.49% -11.07% 14.27% 10.16% n.a. 8.10% 04/30/2015
MSCI All Country Asia ex Japan Index
0.48% -7.32% -12.28% -21.39% 6.21% 4.67% n.a. 3.79%
As of 03/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia ESG Fund
MASGX
-3.66% -12.56% -12.56% -6.94% 11.94% 11.07% n.a. 8.28% 04/30/2015
MSCI All Country Asia ex Japan Index
-2.74% -7.95% -7.95% -14.42% 5.44% 7.05% n.a. 4.60%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016
Matthews Asia ESG Fund
MASGX
11.76% 42.87% 12.55% -9.73% 33.79% -1.40%
MSCI All Country Asia ex Japan Index
-4.46% 25.36% 18.52% -14.12% 42.08% 5.76%

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

Assumes reinvestment of all dividends and/or distributions before taxes. All performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate with market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived. Performance differences between the Institutional class and the Investor class may arise due to differences in fees charged to each class.

Additional performance, attribution, liquidity, value at risk (VaR), security classification and holdings information is available on request for certain time periods.

Growth of a Hypothetical $10,000 Investment Since Inception

(as of 03/31/2022)

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gain distributions or redemption of fund shares.

Ratings

  • OVERALL
  • out of 52 funds
  • 3 YEAR
  • out of 52 funds
  • 5 YEAR
  • out of 46 funds
  • 1 YEAR
  • 2nd
  • 14 out of 27 funds
  • 3 YEAR
  • 1st
  • 3 out of 27 funds
  • 5 YEAR
  • 1st
  • 2 out of 25 funds
  • SINCE INCEPTION
  • 1st
  • 2 out of 25 funds

Ratings agency calculation methodology

Portfolio Managers

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Portfolio Characteristics

(as of 03/31/2022)
Fund Benchmark
Number of Positions 52 1,220
Weighted Average Market Cap $28.5 billion $130.7 billion
Active Share 93.9 n.a.
P/E using FY1 estimates 17.6x 12.4x
P/E using FY2 estimates 13.5x 11.1x
Price/Cash Flow 14.3 7.9
Price/Book 2.4 1.7
Return On Equity 7.7 15.0
EPS Growth (3 Yr) 8.1% 13.4%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 03/31/2022)
6.73%
Alpha
1.05
Beta
104.09%
Upside Capture
80.51%
Downside Capture
0.52
Sharpe Ratio
0.57
Information Ratio
11.42%
Tracking Error
72.04

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 05/31/2022)
Name Sector Country % Net Assets
Bandhan Bank, Ltd. Financials India 5.8
Shriram City Union Finance, Ltd. Financials India 5.8
Samsung SDI Co., Ltd., Pfd. Information Technology South Korea 5.7
Hong Kong Exchanges & Clearing, Ltd. Financials China/Hong Kong 5.7
Full Truck Alliance Co., Ltd. Industrials China/Hong Kong 5.6
Legend Biotech Corp. Health Care United States 5.1
JD Health International, Inc. Consumer Discretionary China/Hong Kong 4.1
Phoenix Mills, Ltd. Real Estate India 3.9
Ecopro BM Co., Ltd. Industrials South Korea 3.9
Ginlong Technologies Co., Ltd. Industrials China/Hong Kong 3.1
TOTAL 48.7

Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.

Portfolio Breakdown (%)

(as of 03/31/2022)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure

Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.

Not all countries are included in the benchmark index(es).

Source: FactSet Research Systems.

Percentage values in data are rounded to the nearest tenth of one percent, so the values may not sum to 100% due to rounding. Percentage values may be derived from different data sources and may not be consistent with other Fund literature.

Distributions

Record Date Ex, Pay and
Reinvest Date
Ordinary
Income
Short Term
Capital Gains
Long Term
Capital Gains
Total Distributions
Per Share
% of NAV Nondividend Distribution (Return of Capital)
12/14/2021 12/15/2021 $0.00000 $0.70374 $0.64204 $1.34578 7.8% N.A.
View History

 

There is no guarantee that the Fund will pay or continue to pay distributions. 

Past performance is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost.

Commentary

Period ended March 31, 2022

For the first quarter of the year, the Fund returned -12.56% (Investor Class) and -12.55% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -7.95% over the same period.

Market Environment:

The first quarter brought into stark relief the U.S. Federal Reserve’s struggle to gain control of both inflation and to a lesser extent inflation expectations. The threat of rising prices was elevated by Russia’s invasion of Ukraine as energy and commodity prices surged over concerns about supply disruptions in the oil, gas, fertilizers, wheat and corn markets. Russia’s invasion has led to a rapid reassessment of geopolitical, energy security and defense priorities broadly all over the world but more specifically in Europe and did not help the market sentiment.

Prospects of China’s potential collaboration with Russia during Ukraine invasion, in light of its “No limits” friendship announcement in early February, led to market worries about China and Chinese companies potentially coming under the threat of Western sanctions like Russia. Lingering issues such as threat of delisting of Chinese ADRs and seeming ineffectiveness and economic cost of continued Zero-COVID and its variant policies also led to further weakness in Chinese equities.

Given these developments, energy was the best performing sector in Asia during the quarter. The financials sector also had positive returns, while health care and consumer discretionary were the worst performers. As a large energy importer, many of the markets of Asia, including South Korea and Taiwan, were negatively impacted by rising oil and gas prices. The best performers were in Southeast Asia, led by Indonesia and Thailand.

Asian currencies mostly held their own against the U.S. dollar. The Thai baht and the Chinese renminbi were the best performers, while the worst performers were from energy importers and included the Japanese yen, the Taiwanese dollar, the Indian rupee and the Korean won.

Performance Contributors and Detractors:

On a country basis, our overweight allocation and stock selection within India contributed the most to the Fund’s relative performance during the quarter. Our stock selection within Singapore also aided performance. On the other hand, stock selection within China, Taiwan and South Korea detracted from performance.

At the sector level, the Fund’s underweight and stock selection within communication services and consumer discretionary, and our overweight and stock selection in real estate added to the Fund’s relative performance. On the other hand, stock selection within information technology, health care and financials detracted most from relative performance. In light of the market’s fast-evolving rate expectations and the energy and commodity price spikes during the quarter, the rotation away from expensive growth stocks continued apace, impacting high-growth sectors such as technology and biotech, which had done well last year.

In terms of individual holdings, Indian stocks contributed most to the Fund’s absolute and relative performance during the quarter, led by Bandhan Bank Ltd., India’s largest microfinance lender. After several quarters of turbulence on the back of COVID lockdowns, general weakness in India’s rural economy, and political risks emanating from state elections, the operations have seemingly stabilized and problem assets mostly provided for, giving a positive background for Bandhan’s stock price.  On the other hand, our health care holdings were among the biggest detractors to performance. Health care holdings in China, including Wuxi Biologics and Innovent Biologics, were further impacted by worries about the effect of the U.S. Unverified List (UVL) on names such as Wuxi and the potential change in clinical trial design requirements by the U.S. Food and Drug Administration (FDA), requiring multi-regional trials for U.S. drug approval instead of single country trials, in the case of Innovent.

Notable Portfolio Changes:

Given the fast-evolving expectations of a global rate upcycle (except for in China where expectations are for looser monetary conditions) and potential for surprises on the upside over the coming quarters, we increased the Fund’s exposure to South Korean financial services during the quarter. We initiated positions in two regional banks in South Korea: DBG Financial Group Inc. and BNK Financial Group Inc. Both have a strong franchise in their respective regions and support small and medium enterprises. We exited small stub holdings in names like Indian Railway Catering & Tourism Company, from which we took profits.

Outlook:

Looking ahead, the Fed’s pace and scope of interest rate hikes and quantitative tightening and the market’s expectation of its evolution remain the most important variables to watch and will have near-term implications for regional, sector and style performance. Russia’s invasion of Ukraine and the attendant impact on inflation also needs careful watching.

We expect corporate earnings to moderate in 2022 as the global recovery continues to expand. We remain watchful about the impact of inflation on corporate earnings. Across the region we see sufficient liquidity, and while we have not seen as much uptake in credit, any meaningful pick up in credit issuance should further support economic growth. In many parts of Asia COVID-19 vaccination is progressing well and provides hope for economic activity normalization in the coming quarters but China’s zero-COVID policy and its variants need watching.

Over the mid-long term we continue to believe that companies that address critical challenges such as climate change and inclusive development will continue to thrive. And for investors interested in sustainability themes, including reducing carbon emissions, alleviating poverty and creating greater financial inclusion in the developing world, Asia remains a key investment destination, in our view. To tackle sustainable themes globally, we believe we need to include the world’s most populous economies, many of which lie in Asia.

As the global economy embarks on a post-pandemic recovery path and markets contend with macro headwinds and volatility, we believe there are attractive opportunities for alpha generation throughout our large, diverse, sustainable investment universe.

View the Fund’s Top 10 holdings as of March 31, 2022. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MASGX as of 03/31/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-6.94% 11.94% 11.07% N.A. 8.28% 04/30/2015

All performance quoted is past performance and is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund's fees and expenses had not been waived. Please see the Fund's most recent month-end performance.

Fees & Expenses
Gross Expense Ratio 1.20%
Net Expense Ratio 1.40%

Matthews has contractually agreed to waive fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2023. Please see the Fund’s prospectus for additional details.

Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. Matthews Asia ESG Fund’s consideration of ESG factors in making its investment decisions may impact the Fund’s relative investment performance positively or negatively.

 

Visit our Glossary of Terms page for definitions and additional information.

Index Definitions

The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Neither the funds nor the Investment Advisor accept any liability for losses either direct or consequential caused by the use of this information.

The views and opinions in the commentary were as of the report date, subject to change and may not reflect current views. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund's future investment intent. It should not be assumed that any investment will be profitable or will equal the performance of any securities or any sectors mentioned herein. The information does not constitute a recommendation to buy or sell any securities mentioned.