TOP
Asia Fixed Income

Matthews Asia Credit Opportunities Fund MCRDX

Snapshot
  • Bottom-up Asia credit strategy, with a focus on risk-adjusted returns
  • Invest primarily in USD-denominated high yield Asian bonds
  • Flexibility to invest across the spectrum of credit quality and issuers’ capital structure

04/29/2016

Inception Date

-2.37%

YTD Return

(as of 06/11/2021)

$9.85

Price

(as of 06/11/2021)

$93.44 million

Fund Assets

(as of 05/31/2021)

Objective

Seeks total return over the long term.

Strategy

Under normal circumstances, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in debt and debt-related instruments issued by companies as well as governments, quasi-governmental entities, and supranational institutions in Asia. Debt and debt-related instruments typically include bonds, debentures, bills, securitized instruments (which are vehicles backed by pools of assets such as loans or other receivables), notes, certificates of deposit and other bank obligations, bank loans, senior secured bank debt, convertible debt securities, credit-linked notes, inflation-linked instruments, repurchase agreements, payment-in-kind securities and derivative instruments with fixed income characteristics.

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. Fixed income investments are subject to additional risks, including, but not limited to, interest rate, credit and inflation risks. 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.

The risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 04/29/2016
Fund Assets $93.44 million (05/31/2021)
Currency USD
Ticker MCRDX
Cusip 577-130-677
Portfolio Turnover 48.5%
Benchmark J.P. Morgan Asia Credit 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 1.14%
Net Expense Ratio 1.14%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • data_graph_selected Created with Sketch.
  • bar_graph_selected Created with Sketch.
As of 05/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Credit Opportunities Fund
MCRDX
0.19% -2.72% -3.36% 7.00% 2.86% 4.10% n.a. 4.03% 04/29/2016
J.P. Morgan Asia Credit Index
0.48% 0.24% -0.55% 5.55% 6.04% 4.55% n.a. 4.54%
As of 03/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Credit Opportunities Fund
MCRDX
-2.09% -2.73% -2.73% 13.45% 2.68% n.a. n.a. 4.30% 04/29/2016
J.P. Morgan Asia Credit Index
-0.39% -1.17% -1.17% 9.00% 5.59% n.a. n.a. 4.56%
For the years ended December 31st
Name 2020 2019 2018 2017
Matthews Asia Credit Opportunities Fund
MCRDX
1.80% 13.34% -2.88% 7.86%
J.P. Morgan Asia Credit Index
6.33% 11.35% -0.77% 5.77%

Source: BNY Mellon Investment Servicing (US) Inc., Index data from J.P. Morgan. 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 03/31/2021)

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.

Yield

(as of 03/31/2021)
9.63% Yield to Worst
8.09% 30-Day SEC Yield
8.24% 30-Day SEC Yield (excluding expense waiver)

30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.

Ratings

  • OVERALL
  • out of 241 funds
  • 3 YEAR
  • out of 241 funds
  • 1 YEAR
  • 3rd
  • 86 out of 122 funds
  • 3 YEAR
  • 3rd
  • 78 out of 110 funds
  • SINCE INCEPTION
  • 2nd
  • 49 out of 105 funds

Ratings agency calculation methodology

Portfolio Managers

Teresa  Kong, CFA photo
Teresa Kong, CFA

Lead Manager

Satya  Patel photo
Satya Patel

Lead Manager

Portfolio Characteristics

(as of 03/31/2021)
2.8
Modified Duration
39
Number of Positions

Source: BNY Mellon Investment Servicing (US) Inc.

Top 10 Positions

(as of 05/31/2021)
Name Sector Currency % Net Assets
Network i2i, Ltd., 5.650%, 04/15/2068 Communication Services U.S. Dollar 5.9
Viet Nam Debt & Asset Trading Corp., 1.000%, 10/10/2025 Financials U.S. Dollar 5.4
Sino-Ocean Land Treasure III, Ltd., 4.900%, 03/21/2068 Real Estate U.S. Dollar 5.2
Honghua Group, Ltd., 6.375%, 08/01/2022 Energy U.S. Dollar 5.0
King Talent Management, Ltd., 5.600%, 06/04/2068 Financials U.S. Dollar 4.9
Tata Motors, Ltd., 5.875%, 05/20/2025 Consumer Discretionary U.S. Dollar 4.8
Luye Pharma Group, Ltd., Cnv., 1.500%, 07/09/2024 Health Care U.S. Dollar 4.6
Indika Energy Capital III Pte, Ltd., 5.875%, 11/09/2024 Energy U.S. Dollar 4.3
Times China Holdings, Ltd., 6.200%, 03/22/2026 Real Estate U.S. Dollar 3.6
ABJA Investment Co. Pte, Ltd., 5.450%, 01/24/2028 Materials U.S. Dollar 3.3
TOTAL 47.0

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 03/31/2021)
  • Sector Allocation
  • Country Allocation
  • Currency Allocation
  • Quality Distribution
  • Asset Type Breakdown
Sector Fund
Real Estate 29.1
Financials 22.1
Energy 11.8
Consumer Discretionary 10.4
Communication Services 8.5
Health Care 6.4
Materials 6.3
Foreign Government Bonds 1.4
Industrials 0.9
Information Technology 0.9
Cash and Other Assets, Less Liabilities 2.1

"Foreign Government Bonds" category includes supranationals.
Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.

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

By issuer's country of risk Fund
China/Hong Kong 49.4
India 17.3
Indonesia 11.3
Vietnam 6.9
Thailand 5.1
Australia 2.3
Malaysia 2.1
South Korea 1.8
New Zealand 0.9
Philippines 0.9
Cash and Other Assets, Less Liabilities 2.1

Not all countries are included in the benchmark index. Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.
Supranational is an international organization in which member states transcend national boundaries, (ex. IMF).

Currency Fund Contribution To Duration
U.S. Dollar 100.0 2.8

Cash and other assets may include forward currency exchange contracts and certain derivative instruments that have been marked-to-market.

Quality Distribution Fund
BBB 2.3
BB+ 5.2
BB 18.7
BB- 18.6
B+ 12.0
B 11.3
B- 2.8
CCC+ 1.8
Not Rated 25.1
Cash and Other Assets, Less Liabilities 2.1

Credit quality is provided for the underlying bond holdings of the Fund and does not include common equities, cash and other assets and percentage values will not total 100%. Credit quality rating symbols reflect that of S&P and generally credit ratings range from AAA (highest) to D (lowest). When ratings from Moody's, S&P and Fitch are available for a bond in the Fund, the middle rating of the three is used. When two ratings are available, the lowest rating is used. When only one rating is provided, that one is used. Foreign government bonds without a specific rating are assigned the country rating provided by one of the three agencies. Securities that are not rated by any one of the three agencies are reflected as such.
Sources: FactSet Research Systems, Moody's, S&P and Fitch

Asset Type Fund
Corporate Bonds 76.7
Convertible Bonds 14.3
Government Bonds 6.9
Cash and Other Assets, Less Liabilities 2.1

Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.

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)
05/25/2021 05/26/2021 $0.02845 $0.00000 $0.00000 $0.02845 0.3% N.A.
04/26/2021 04/27/2021 $0.03737 $0.00000 $0.00000 $0.03737 0.4% N.A.
03/24/2021 03/25/2021 $0.03841 $0.00000 $0.00000 $0.03841 0.4% N.A.
02/22/2021 02/23/2021 $0.02591 $0.00000 $0.00000 $0.02591 0.3% N.A.
01/25/2021 01/26/2021 $0.04658 $0.00000 $0.00000 $0.04658 0.5% N.A.
12/15/2020 12/16/2020 $0.05833 $0.02672 $0.00000 $0.08505 0.8% N.A.
11/18/2020 11/19/2020 $0.04203 $0.00000 $0.00000 $0.04203 0.4% N.A.
10/26/2020 10/27/2020 $0.03420 $0.00000 $0.00000 $0.03420 0.3% N.A.
09/28/2020 09/29/2020 $0.03784 $0.00000 $0.00000 $0.03784 0.4% N.A.
08/27/2020 08/27/2020 $0.04322 $0.00000 $0.00000 $0.04322 0.4% N.A.
07/27/2020 07/28/2020 $0.03875 $0.00000 $0.00000 $0.03875 0.4% N.A.
06/24/2020 06/25/2020 $0.03634 $0.00000 $0.00000 $0.03634 0.4% N.A.
05/26/2020 05/27/2020 $0.04014 $0.00000 $0.00000 $0.04014 0.4% N.A.
04/27/2020 04/28/2020 $0.03833 $0.00000 $0.00000 $0.03833 0.4% N.A.
03/25/2020 03/26/2020 $0.03086 $0.00000 $0.00000 $0.03086 0.3% N.A.
02/26/2020 02/27/2020 $0.03930 $0.00000 $0.00000 $0.03930 0.4% 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, 2021

For the quarter ending March 31, 2021, the Matthews Asia Credit Opportunities Fund returned -2.73% (Investor Class) and -2.69% (Institutional Class), while its benchmark, the J.P. Morgan Asia Credit Index returned -1.17%.

Market Discussion:

The first quarter of 2021 was characterized by continued improvements in market sentiment and conditions that first began in November 2020. Average spread of the J.P. Morgan Asia Credit Index was 32 basis points (0.32%) tighter in the quarter. Asia U.S. dollar-denominated non-investment grade bond spreads tightened 38 basis points (0.32%), from 617 basis points (6.17%) at the beginning of the quarter to 579 basis points (5.79%) at the end of the quarter. A number of reasons drove the improved market sentiment. First, the U.S. passed US$1.9 trillion in COVID stimulus and discussion of additional infrastructure stimulus of US$ 2-3 trillion.[i] On the monetary side, the Fed keeping short-term interest rate close to zero, on top of the fiscal stimulus, led to market expectation of higher inflation. Economic recovery was further boosted by news of progress and effectiveness of coronavirus vaccine distribution.

In Asia, China set its 2021 growth target to “above 6%” which was generally perceived by the market as a conservative target. China’s rapid containment of the COVID crisis within its borders meant that it did not require extraordinary fiscal or monetary stimulus in 2020. In fact, the mood seemed to have shifted towards tighter regulatory oversight in many sectors. The regulators’ pushback towards Ant Financial’s IPO could be a harbinger of more efforts to reduce monopoly power within the tech sector. Other consumer-facing sectors could also face more regulation, such as in the private education space. 

Performance Contributors and Detractors:

Overall, fixed income investments returned negatively in the quarter as U.S. Treasury yields rose. During the quarter, the two primary sources of underperformance came from our exposures to the Indonesian textile industry. Specifically, PB International (Pan Brothers) and Sri Rejeki Isman (Sritex) are two Indonesian textile manufacturers that are negotiating with banks to roll over maturing bank debt.  Despite good operating revenue recovery, the two companies faced challenges refinancing their bank loans. Indonesian textile industry suffered contagion and increased credit scrutiny, brought on by the default of Duniatex, another Indonesian textile manufacturer, in 2020. Given the continued impasse between the banks and the companies, the bonds fell as investors priced in a higher probability of a liquidity issue.

Outside of Indonesian textile, the Fund’s holdings in high yield corporates generally returned positively in the quarter. The biggest contributors came from exposures to convertible bonds, such as Chinese shipbuilder Poseidon Finance and Chinese pharmaceutical company Luye Pharma. Additionally, the portfolio’s overweight to Chinese real estate developers contributed positively.

Notable Portfolio Changes:

During the quarter, we exited two positions—Poseidon Finance and Syngenta. Both are subsidiaries of Chinese State-Owned Enterprises, which put them potentially as targets of divestment according to Executive Order 13959 (EO). The EO prohibited transacting in certain securities and derivatives of Communist China military companies. The language and coverage of the EO was sufficiently broad that our concern was that these two subsidiaries will eventually be included on the list of divestment targets. Since these positions had approached our price targets, we decided to take profits to avoid future illiquidity risks.

We replaced these positions with Chinese real estate developers, which should have less geopolitical risks: Powerlong, a mall developer and China SCE Group, a residential developer. We also added JSW Steel, an Indian steel producer, and Kasikorn Bank perpetual bonds, one of the biggest banks in Thailand.

Outlook:

Looking ahead, uncertainties remain regarding the pace of COVID containment around the world. Potential side effects of one vaccine has impeded a rapid rollout of vaccines in Asia markets. In addition, U.S.-China tensions continue, as focus on trade and U.S. investments have broadened to human rights and potential implications of multinational corporations’ exposure to companies operating in sectors like cotton and textile supply chain. The recent tensions in certain areas such as the cotton supply chain as well as ongoing pushes to reduce financial ties with Chinese state-owned companies highlight the increased risks due to U.S.-China relations. We will continue to monitor the situation on both sides of the Pacific. We are mindful that facile market reactions to headlines sometimes present good investing opportunities as well.

As markets continue to assess the uncertainties mentioned above, there are many idiosyncratic country risks and company specific risks to avoid. We expect dispersion between geographical regions and between different credit qualities to remain high, and we remain focused on navigating these dispersions.  Looking at the medium to long term, we still believe that Asia U.S. dollar-denominated non-investment grade bonds offers the most attractive risk adjusted returns, especially for this period in the global economic cycle, which is one of rising activity and rising rates. We continue to favor the Chinese real estate sector as they offer relatively high yields and are less exposed to geopolitical risks relative to other sectors.  

 

As of March 31, 2021, the securities mentioned comprised the Matthews Asia Credit Opportunities Fund in the following percentages:  PB International BV, 7.625%, 01/26/2022, 1.8%; PT Sri Rejeki Isman, 7.250%, 01/16/2025; Luye Pharma Group, Ltd., Cnv., 1.500%, 07/09/2024, 4.7%; Powerlong Real Estate Holdings, Ltd., 5.950%, 04/30/2025, 3.1%; China SCE Group Holdings, Ltd., 7.000%, 05/02/2025, 3.0%;Periama Holdings LLC (JSW Steel), 5.950%, 04/19/2026, 3.0%; and Kasikornbank Public Co., Ltd., 5.275%, 04/14/2068, 3.0%.

The Fund held no positions in PT Duniatex, Poseidon Finance and Syngenta Finance. Current and future portfolio holdings are subject to change and risk.

Average Annual Total Returns - MCRDX as of 03/31/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
13.45% 2.68% N.A. N.A. 4.30% 04/29/2016

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 1.14%
Net Expense Ratio 1.14%

Matthews has contractually agreed to waive fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2022. Please see the Fund’s prospectus for additional details.

Yields as of 03/31/2021
Yield to Worst 9.63%
30-Day SEC Yield 8.09%
30-Day SEC Yield (excluding expense waiver) 8.24%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 03/31/2021, expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-day period. The 30-Day SEC Yield should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate. Source: BNY Mellon Investment Servicing (US) Inc.

Yield to worst is the lowest potential yield a bond can receive without actually defaulting – is for the underlying bond-only portion of the portfolio, and as of May 2020, is calculated by making worst-case scenario assumptions using the weighted averages of the underlying security-level yields, weighted according to each security’s market value. It does not represent or predict the yield on any fund. Source: FactSet Research Systems 

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. Fixed income investments are subject to additional risks, including, but not limited to, interest rate, credit and inflation risks. 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.

 

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.