Snapshot
- Seeks alpha in Asia’s emerging economies by capitalizing on the rising Asia consumer
- High-conviction equity portfolio focused on sustainable growth companies
- All-cap fundamental approach driven by on-the-ground, proprietary research
09/12/1994
Inception Date
7.53%
YTD Return
(as of 01/19/2021)
$37.57
Price
(as of 01/19/2021)
$8.76 billion
Fund Assets
(as of 12/31/2020)
Long-term capital appreciation
Under normal circumstances, the Matthews Pacific Tiger 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 located in Asia Ex Japan. 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.
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.
The risks associated with investing in the Fund can be found in the prospectus.
Inception Date | 09/12/1994 | |
Fund Assets | $8.76 billion (12/31/2020) | |
Currency | USD | |
Ticker | MAPTX | |
Cusip | 577-130-107 | |
Portfolio Turnover | 17.08% | |
Benchmark | MSCI All Country Asia ex Japan Index | |
Geographic Focus | Asia Ex Japan - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region, excluding Japan |
Gross Expense Ratio | 1.08% | |
Net Expense Ratio | 1.05% |
MSCI AC Asia ex Japan Index since inception value calculated from 08/31/94.
Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.
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.
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.
Lead Manager
Portfolio Manager
Sharat Shroff is a Portfolio Manager at Matthews Asia and manages the firm's Pacific Tiger Strategy and co-manages the India Strategy. Prior to joining the firm in 2005 as a Research Analyst, Sharat worked in the San Francisco and Hong Kong offices of Morgan Stanley as an Equity Research Associate. Sharat received a Bachelor of Technology from the Institute of Technology in Varanasi, India and an MBA from the Indian Institute of Management, in Calcutta, India. He is fluent in Hindi and Bengali.
Co-Manager
Portfolio Manager
Raymond Deng is a Portfolio Manager at Matthews Asia, and co-manages the firm's Pacific Tiger and Asia Innovators Strategies. Prior to joining the firm in 2014, Raymond earned an M.B.A from The University of Chicago Booth School of Business. From 2008 to 2012, he worked at Booz & Company, most recently as a Senior Consultant responsible for developing corporate growth strategies, financial analysis and modeling and client management. Raymond received a B.S. in Industrial Engineering from Tsinghua University in Beijing. He is fluent in Mandarin.
Co-Manager
Portfolio Manager
Inbok Song is a Portfolio Manager at Matthews Asia and co-manages the firm's Pacific Tiger Strategy. Prior to rejoining the firm in 2019, Inbok spent three years at Seafarer Capital Partners as a portfolio manager, the firm's Director of Research and chief data scientist. Previously she was at Thornburg Investment Management as an associate portfolio manager. From 2007 to 2015, she was at Matthews Asia, most recently as a portfolio manager. From 2005 to 2006, Inbok served as an Analyst and Technology Specialist at T. Stone Corp., a private equity firm in Seoul, South Korea. From 2004 to 2005, she was a research engineer for Samsung SDI in Seoul. Inbok received both a B.A. and Masters in Materials Science and Engineering from Seoul National University. She received a Masters in International Management from the University of London, King's College, and also an M.A. in Management Science and Engineering, with a concentration in finance from Stanford University. Inbok is fluent in Korean.
Source: BNY Mellon Investment Servicing (US) Inc.
Source: FactSet Research Systems
Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.
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.
Visit our Glossary of Terms page for definitions and additional information.
The Markit iBoxx Asian Local Bond Index tracks the total return performance of a bond portfolio consisting of local-currency denominated, high quality and liquid bonds in Asia ex-Japan. The Markit iBoxx Asian Local Bond Index includes bonds from the following countries: China (on- and offshore markets), Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.
The J.P. Morgan Asia Credit Index (JACI) tracks the total return performance of the Asia fixed-rate dollar bond market. JACI is a market cap-weighted index comprising sovereign, quasi-sovereign and corporate bonds and is partitioned by country, sector and credit rating. JACI includes bonds from the following countries: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand.
The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Index is a free float-adjusted market capitalization-weighted index of Chinese equities that includes H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges, Hong Kong-listed securities known as Red chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China) and foreign listings (e.g. ADRs).
The MSCI China All Shares Index captures large and mid-cap representation across China A shares, B shares, H shares, Red chips (issued by entities owned by national or local governments in China), P chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g. ADRs). The index aims to reflect the opportunity set of China share classes listed in Hong Kong,Shanghai, Shenzhen and outside of China.
The MSCI Emerging Markets (EM) Asia Index is a free float-adjusted market capitalization weighted index of the stock markets of China, India, Indonesia, Malaysia, Pakistan, Philippines, South Korea, Taiwan and Thailand. The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The S&P Bombay Stock Exchange 100 (S&P BSE 100) Index is a free float–adjusted market capitalization–weighted index of 100 stocks listed on the Bombay Stock Exchange.
The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.
The Korea Composite Stock Price Index (KOSPI) is a market capitalization–weighted index of all common stocks listed on the Korea Stock Exchange.
The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Small Cap Index is a free float-adjusted market capitalization-weighted small cap index of the Chinese equity securities markets, including H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges,Hong Kong-listed securities known as Red Chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g., ADRs).
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.
Commentary
Period ended September 30, 2020
For the quarter ending Sept. 30, 2020, the Matthews Pacific Tiger Fund returned 13.33% (Investor Class) and 13.38% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned 10.79%.
Market Environment:
Asia ex-Japan equities continued their upward trajectory in third quarter, led by gains in the larger markets across the region. Many Asian currencies and equities rallied as economic activity slowly resumed, with earlier pandemic-related lockdowns easing. With an eye toward mitigating the health care and economic impacts of the pandemic, North Asia countries have generally been more successful, coordinated and effective in their public health response. South and Southeast Asia have had a relatively tougher time combatting the virus with intermittent imposition of localized lockdowns.
Notably, the trend towards a broad-based recovery in equity gains that started in the second quarter persisted in the third quarter, with most sectors appreciating, except banks and utilities. Consumer discretionary was the best performing sector in the region partly helped by a sharp recovery in autos. Valuations for automakers had become inexpensive, and investors are looking at the recovery in volumes, especially in China, as a potential driver of future earnings.
For the second quarter in a row, small caps outperformed large caps suggesting that investors are anticipating broader improvement in economic activity. As if on cue, interest rates across some of the major economies like China and India rose further in the third quarter, perhaps on the back of continued issuances of government bonds and a recovery in growth. The uptick in interest rates in China and India is a contrast to many other parts of the world. For global equity investors, exposure to Asia provided meaningful diversification in the quarter through access to more varied return drivers, including positive local interest rates and rising domestic consumption.
Performance Contributors and Detractors:
Stock selection in China was a contributor to performance in the quarter. Among individual stocks, Chinese domestic A shares companies Inner Mongolia Yili Industrial Group Co. and China Resources Beer were both contributors. China’s largest dairy producer, Inner Mongolia Yili Industrial Group Co enjoyed stock price gains on growing expectations that the consumer’s preference for quality dairy products and healthier lifestyles will likely be a growth driver for Yili. Meanwhile, China Resources Beer has also gained market share in a consolidating marketplace, while employing a very nimble approach to operations during the pandemic. By keeping inventory low, the company has been able to increase its prices, and employ more competitive marketing practices.
On the other hand, stock selection in India was a detractor in the quarter. We continue to see weakness among Indian financials, including Kotak Mahindra Bank Limited of India. India’s banking and financial system in India continues to wrestle with the economic impacts of the coronavirus. In addition, continued changes by the central bank in India regarding rules for recognizing and restructuring bad loans has weighed on the sector. At the same time, we believe there may be long-term growth in the sector. Our approach continues to be maintaining exposure to banks with strong balance sheets in order to capture a potential turnaround in the sector.
Notable Portfolio Changes:
During the quarter, we initiated a new position in LG Chem, a South Korean EV battery maker and chemical manufacturer. As a leading supplier of EV batteries, LG Chem is benefiting from the growth of the overall EV industry, for which batteries are one of the largest associated costs. LG Chem produces batteries at scale, enabling the company to serve a large, addressable global market. The company’s customer base and revenue sources are well diversified, including significant market share within high-growth European EV markets. LG Chem also has attractive, positive capacity to build up other business lines, providing additional drivers of growth.
We also rotated capital in the quarter, trimming some positions among higher valuation stocks and adding to high-quality positions that represented better relative value in our view. For instance, we have initiated new positions in businesses where we see the opportunities from augmentation of industrial/technology supply chain (Singapore), and, prospect of recovery in consumption related activities as the threat from COVID recedes (India).
Outlook:
Stepping back from some of the near-term issues in the region, we are encouraged by the progress of economic reforms in Asia. Amid the pandemic, many of Asia’s policymakers have accelerated efforts toward further opening capital markets to foreign investments, as well as toward reforming labor laws, giving employers greater flexibility in managing their workforces. While the nature of reforms varies among countries in different stages of economic development, the overall trend is unifying and positive for Asia’s capital markets.
Chinese policymakers have been focused on developing the country’s capital markets as an alternate channel of financing, and the latest efforts are an endeavor to attract inflows from foreign investors by further simplifying access to its domestic market (A-shares) as well as to enhance liquidity and risk management for domestic entities. For instance, the continued progress on the registration-based IPO mechanism aims to provide greater access to equity capital for entrepreneurs and small- and medium-sized businesses. These are helpful and timely developments, as we also see a partial augmentation of the listings of Chinese companies as ADRs on the New York Stock Exchange seeking a secondary listing in Hong Kong or even in mainland China.
In India, the nature of the reforms is somewhat different but could be equally impactful. India’s parliament has recently passed some measures that look to simplify and consolidate the plethora of the country’s labor laws , reducing employers’ burden of recruiting employees and easing regulatory compliance. Elsewhere in the region, we’ve seen a new omnibus law in Indonesia that includes reforms to existing labor laws and the launch of a sovereign wealth fund to help institutionalize Indonesia’s investor base, both of which will have positive long-term reverberations for the country’s economy and equity market.
These economic reforms, combined with rising household incomes and growing domestic consumption, make Asia an attractive destination in our view for long-term equity investors. In terms of our portfolio, our approach remains premised on the idea of looking for sustainable growth, particularly in businesses that are domestically oriented. We also tend to favor companies that have greater ballast on their balance sheet and able to survive the pandemic-related economic turmoil better than others. As such, we believe a revival in economic activity across the region should benefit our portfolio holdings.
As of 9/30/2020, the securities mentioned comprised the Matthews Pacific Tiger Fund in the following percentages: Inner Mongolia Yili Industrial Group Co., Ltd. Class A, 2.4%; China Resources Beer Holdings Co., Ltd., 2.7%; Kotak Mahindra Bank, Ltd., 1.2%; LG Chem Ltd., 2.0%. Current and future portfolio holdings are subject to change and risk.
Average Annual Total Returns - MAPTX as of 12/31/2020
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
Matthews has contractually agreed to waive a portion of its advisory fee and administrative and shareholder services fee if the Fund's average daily net assets are over $3 billion, as follows: for every $2.5 billion average daily net assets of the Fund that are over $3 billion, the advisory fee rate and the administrative and shareholder services fee rate for the Fund with respect to such excess average daily net assets will be each reduced by 0.01%, in each case without reducing such fee rate below 0.00%. Any amount waived by Matthews pursuant to this agreement may not be recouped by Matthews. This agreement will remain in place until April 30, 2021 and may be terminated (i) at any time by the Board of Trustees upon 60 days' prior written notice to Matthews; or (ii) by Matthews at the annual expiration date of the agreement upon 60 days' prior written notice to the Trust, in each case without payment of any penalty.