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Asia Growth

Matthews India Fund MINDX

Snapshot
  • Unconstrained all-cap strategy focused on companies with a sustainable competitive edge and pricing power, which are able to perform throughout economic cycles
  • Fundamental bottom-up approach to seek well-run entrepreneurial companies with sustainable organic growth and trustworthy managements
  • Bias toward businesses that cater to rising domestic consumer demand and to policy-independent sectors

10/31/2005

Inception Date

-2.88%

YTD Return

(as of 01/26/2022)

$27.36

Price

(as of 01/26/2022)

$763.78 million

Fund Assets

(as of 12/31/2021)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews India Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in publicly traded common stocks, preferred stocks and convertible securities of companies located in India. The Fund seeks to invest in companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health.

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 markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.

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

Fund Facts
Inception Date 10/31/2005
Fund Assets $763.78 million (12/31/2021)
Currency USD
Ticker MINDX
Cusip 577-130-859
Portfolio Turnover 57.4%
Benchmark S&P Bombay Stock Exchange 100 Index
Geographic Focus India
Fees & Expenses
Gross Expense Ratio 1.15%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 12/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews India Fund
MINDX
1.47% -2.57% 18.11% 18.11% 10.88% 10.73% 12.89% 10.91% 10/31/2005
S&P Bombay Stock Exchange 100 Index
2.72% -1.53% 24.08% 24.08% 15.33% 15.39% 12.13% 11.11%
As of 12/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews India Fund
MINDX
1.47% -2.57% 18.11% 18.11% 10.88% 10.73% 12.89% 10.91% 10/31/2005
S&P Bombay Stock Exchange 100 Index
2.72% -1.53% 24.08% 24.08% 15.33% 15.39% 12.13% 11.11%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews India Fund
MINDX
18.11% 16.45% -0.88% -10.09% 35.79% -1.23% 0.90% 63.71% -5.90% 31.54%
S&P Bombay Stock Exchange 100 Index
24.08% 13.92% 8.53% -6.00% 41.88% 2.32% -6.41% 31.40% -4.70% 28.62%

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 12/31/2021)

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 20 funds
  • 3 YEAR
  • out of 20 funds
  • 5 YEAR
  • out of 18 funds
  • 10 YEAR
  • out of 14 funds
  • 1 YEAR
  • 4th
  • 22 out of 23 funds
  • 3 YEAR
  • 4th
  • 18 out of 20 funds
  • 5 YEAR
  • 4th
  • 17 out of 18 funds
  • 10 YEAR
  • 3rd
  • 8 out of 14 funds
  • SINCE INCEPTION
  • n.a.
  • 1 out of 2 funds

Ratings agency calculation methodology

Portfolio Managers

Peeyush  Mittal, CFA photo
Peeyush Mittal, CFA

Lead Manager

Sharat  Shroff, CFA photo
Sharat Shroff, CFA

Co-Manager

Portfolio Characteristics

(as of 12/31/2021)
Fund Benchmark
Number of Positions 54 101
Weighted Average Market Cap $53.5 billion $68.2 billion
Active Share 50.7 n.a.
P/E using FY1 estimates 31.3x 23.7x
P/E using FY2 estimates 23.9x 20.3x
Price/Cash Flow n.a. 16.7
Price/Book 4.3 3.6
Return On Equity 16.0 16.1
EPS Growth (3 Yr) 11.3% 2.0%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 12/31/2021)
-3.39%
Alpha
0.98
Beta
77.53%
Upside Capture
91.11%
Downside Capture
0.40
Sharpe Ratio
-0.73
Information Ratio
6.06%
Tracking Error
93.99

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 12/31/2021)
Name Sector % Net Assets
Infosys, Ltd. Information Technology 7.4
HDFC Bank, Ltd. Financials 6.7
Reliance Industries, Ltd. Energy 6.4
ICICI Bank, Ltd. Financials 5.6
Bajaj Finance, Ltd. Financials 4.3
Tata Consultancy Services, Ltd. Information Technology 4.0
Kotak Mahindra Bank, Ltd. Financials 3.5
Shriram City Union Finance, Ltd. Financials 3.4
Housing Development Finance Corp., Ltd. Financials 2.8
Maruti Suzuki India, Ltd. Consumer Discretionary 2.5
TOTAL 46.6

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 12/31/2021)
  • Sector Allocation
  • Market Cap Exposure

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

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 $0.26431 $2.55767 $2.82198 9.2% N.A.
12/15/2020 12/16/2020 $0.00000 $0.17084 $0.62672 $0.79756 3.1% 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 December 31, 2021

For the year ending December 31, 2021, the Matthews India Fund returned 18.11% (Investor Class) and 18.28% (Institutional Class), while its benchmark, the S&P Bombay Stock Exchange 100 Index, returned 24.08% over the same period. For the fourth quarter of the year, the Fund returned -2.57% (Investor Class) and -2.53% (Institutional Class), while the benchmark returned -1.53%.

Market Environment:

India was the bright spot in the emerging markets last year. After a painful period enduring a second COVID surge in the Spring, the economy and the markets rebounded resulting in an impressive equity market performance.

A number of positive factors were at play. First, the Reserve Bank of India maintained its accommodative monetary policy stance. Low interest rates led to a huge influx of retail investors into India’s equity markets and facilitated increased demand in the real estate sector. Second, COVID-related restrictions on mobility fueled rapid growth in India’s information technology (IT) sector and nascent technology platforms as organizations across the globe adopted digital ways of working and home entertainment and gaming expanded. IT firms are hiring workers at the fastest clip in years. That doesn’t just mean good job opportunities are being created - it’s also leading to increased consumption. Third, China-U.S. geopolitical tensions and China’s regulatory interventions in its domestic markets have worked to India’s benefit. Investors sought out high-growth opportunities outside of China and India fitted the bill.

Performance Contributors and Detractors:

From a sector perspective, our allocation and stock selection within IT and our stock selection within health care contributed the most to performance for the full year. On the other hand, our allocation and stock selection within financials and materials detracted from performance. The Fund has traditionally not invested in steel and aluminum producing companies, some of which did very well aided by a healthy pricing environment for their products. Enhanced profitability of these companies on the back of low valuation led to strong equity performance and created the negative attribution for the Fund.

Looking at individual portfolio holdings, IT services and consulting companies Mindtree and Larsen & Toubro Infotech were among the top contributors to performance. India-based IT services firms are seeing strong demand on the back of greater outsourcing of digital services by corporates globally. Also, smaller IT companies have shown faster growth compared to their larger peers in the last 12-18 months. Conversely, Bandhan Bank, a financial services company providing full-service banking including microfinance products to traditionally underserved markets, detracted the most during 2021. Bandhan Bank dispenses credit to low-income borrowers, some of whom had their finances upended by the COVID surge. As a result, the bank experienced slippage in its credit quality which led to the stock’s steep underperformance. We continue to hold Bandhan Bank as we believe the company should be able to overcome these short-term cyclical issues due to the bank’s high underlying business profitability and solid capital position. 

Notable Portfolio Changes:

We have reduced our holdings in consumer staples stocks after a strong performance in 2020. These companies had benefited from the pantry-loading phenomenon while COVID was peaking in India. As mobility has improved, this trend has weakened. Consequently, we exited Marico, a consumer goods company, and Britannia Industries, a foods business.

In terms of additions, we took a position in Maruti Suzuki India, a unit of Suzuki Motor Corp. The company has the largest market share in the passenger vehicle (PV) segment in India. PV sales have been in the doldrums in India for the last three years but given the low interest rate environment we think Maruti Suzuki should be a beneficiary of a post-COVID consumption demand uptick in India.

Outlook:

The underlying macroeconomic environment continues to be benign in India. Government policies have been very supportive of business and capital formation and we expect that to continue. We also expect job creation to be strong and that bodes well for consumption growth.

Having said that, high inflation globally means that central bankers around the world, India included, are looking to normalize ultra-easy monetary policy. As cost of capital starts to rise it is inevitable that we are going to see downward volatility in equities globally, particularly where the valuations have expanded materially. India is not going to be immune to this.

For now, India’s traditional industries of IT and manufacturing continue to gain ground and its startup tech stocks should keep benefiting from China’s short-term woes. The financials sector seems to be over the worst in terms of credit quality issues and margins should improve as interest rates rise. A tighter monetary policy should also reinforce the competitive advantage of India’s large money center banks.

Overall, we’re confident India has a robust growth trajectory that will be propelled by both its coming-of-age tech stocks and recovering cyclical engines. The country is leaning into its vast IT talent and gaining ground in the global digital economy. Despite the near-term challenges, we will continue with our conservative approach to portfolio construction, which includes investing in businesses with strong balance sheets and cash flows that we believe will benefit from a cyclical economic recovery ahead.

 

As of Dec 31, 2021, the securities mentioned comprised the Matthews India Fund in the following percentages: Bandhan Bank Ltd., 2.3%; Mindtree Ltd., 1.5%; Larsen & Toubro Infotech Ltd., 1.2%; Maruti Suzuki India Ltd., 1%. The Fund held no positions in: Marico Ltd. and Britannia Industries Ltd. Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MINDX as of 12/31/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
18.11% 10.88% 10.73% 12.89% 10.91% 10/31/2005

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 1.15%

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 markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.

 

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.