11/30/2011
Inception Date
-2.51%
YTD Return
(as of 04/09/2021)
$10.88
Price
(as of 04/09/2021)
$136.65 million
Fund Assets
(as of 03/31/2021)
Seeks total return over the long term with an emphasis on income.
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 income-producing securities including, but not limited to, dividend paying equity securities, and debt and debt-related instruments issued by governments, quasi-governmental entities, supra-national institutions, and companies in Asia. Investments may be denominated in any currency, and may represent any part of a company’s capital structure from debt to equity or with features of both.
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.
| Inception Date | 11/30/2011 | |
| Fund Assets | $136.65 million (03/31/2021) | |
| Currency | USD | |
| Ticker | MAINX | |
| Cusip | 577-125-503 | |
| Portfolio Turnover | 39.7% | |
| Benchmark | 50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index | |
| Geographic Focus | Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region | |
| Gross Expense Ratio | 1.08% | |
| Net Expense Ratio | 1.07% | |
Source: BNY Mellon Investment Servicing (US) Inc., Index data from HSBC, iBoxx (Markit). All performance is in US$.
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.
For the Matthews Asia Total Return Bond Fund, the Index performance reflects the returns of the discontinued predecessor HSBC Asian Local Bond Index up to December 31, 2012 and the returns of the successor Markit iBoxx Asian Local Bond Index thereafter.
As of May 1, 2016, the HSBC Asian Local Bond Index became the Markit iBoxx Asian Local Bond Index.
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.
30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.
Ratings (as of 03/31/2021)
CATEGORY: Emerging Markets Bond
Quartile & Rankings (as of 12/31/2020)
CATEGORY: Emerging Mrkts Hard Currency Debt Funds
Ratings agency calculation methodology
Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.
The Overall Morningstar® Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and (if applicable) ten-year ratings.
Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
Lipper Analytical Services, Inc., rankings are based on total return, including reinvestment of dividends and capital gains for the stated periods. Funds are assigned a rank within a universe of funds similar in investment objective as determined by Lipper. For the absolute rankings shown the lower the number rank, the better the Fund performed compared to other funds in the classification group. Lipper also calculates a quartile ranking which divides the peer group into quartiles to identify funds of similar quality. Funds in the 1st or 2nd quartile had outperformed the average fund in the peer group while funds in the 3rd or 4th quartile had underperformed.
Lead Manager
Portfolio Manager
Teresa Kong is a Portfolio Manager at Matthews Asia and manages the firm’s Asia Total Return Bond and Asia Credit Opportunities Strategies. Prior to joining Matthews Asia in 2010, she was Head of Emerging Market Investments at Barclays Global Investors, now known as BlackRock, and responsible for managing the firm’s investment strategies in Emerging Asia, Eastern Europe, Africa and Latin America. She developed and managed strategies spanning absolute return, active long-only and exchange-traded funds. In addition to founding the Fixed Income Emerging Markets Group at BlackRock, she was also Senior Portfolio Manager and Credit Strategist on the Fixed Income credit team. Previously, Teresa was a Senior Securities Analyst in the High Yield Group with Oppenheimer Funds, and began her career with J.P. Morgan Securities Inc., where she worked in the Structured Products Group and Latin America Capital Markets Group. She received both a B.A. in Economics and Political Science and an M.A. in International Development Policies from Stanford University. She speaks Cantonese fluently and is conversational in Mandarin.
Co-Manager
Portfolio Manager
Satya Patel is a Portfolio Manager at Matthews Asia and manages the firm's Asia Credit Opportunities Strategy and co-manages the Asia Total Return Bond and Asian Growth and Income Strategies. Prior to joining Matthews Asia in 2011, Satya was an Investment Analyst with Concerto Asset Management. He earned his MBA from the University of Chicago Booth School of Business in 2010. In 2009, Satya worked as an Investment Associate in Private Placements for Metlife Investments and from 2006 to 2008, he was an Associate in Credit Hedge Fund Sales for Deutsche Bank in London. He holds a Master's in Accounting and Finance from the London School of Economics and a B.A. in Business Administration and Public Health from the University of Georgia. Satya is proficient in Gujarati.
Co-Manager
Portfolio Manager
Wei Zhang is a Portfolio Manager at Matthews Asia and co-manages the Asia Total Return Bond Strategy. Prior to joining the firm in 2015, he earned an MBA from Columbia University. From 2008 to 2012, Wei worked as an analyst at Bluecrest Capital Management, evaluating fundamental investments in equity and credit, with a focus on industrials, basic materials and energy sector opportunities. From 2007 to 2008, he was also an analyst with GF Capital Management, where he performed in-depth fundamental research, built and maintained financial models and participated in acquisition contact negotiations. He started his career as an analyst at Sowood Capital Management in 2006. Wei received a B.S. in Finance and International Business from the Leonard N. Stern School of Business at New York University. He is fluent in Mandarin.
Source: BNY Mellon Investment Servicing (US) Inc.
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 December 31, 2020
For the year ending December 31, 2020, the Matthews Asia Total Return Fund returned 5.36% (Investor Class) and 5.60% (Institutional Class), while its benchmark, the 50% Markit iBoxx Asian Local Bond/ 50% J.P. Morgan Asia Credit Index returned 7.95%. For the fourth quarter of the year, the Fund returned 5.41% (Investor Class) and 5.48% (Institutional Class) versus 3.70% for the Index.
Market Discussion:
Just as the COVID-19 pandemic re-shaped our daily lives, it also reshaped markets. Sectors that were traditionally considered risky, such as IT became darlings as work-from-home became “safe” while traditionally “safe” sectors like gaming and real estate investment trusts (REITs) became “risky” as all sectors faced a new paradigm of virtual over bricks and mortar. The theme of safety, and safety over risky, dominated all asset classes. Investment grade outperformed high yield, developed markets (DM) rates outperformed emerging markets (EM) rates, gold outperformed copper and oil. Within Asia high yield, companies with little liquidity risks outperformed those with more murky stories.[i] The equity market was no different, favoring safe themes such as companies that benefited from stay-at-home or tech names that benefited from secular growth trends. Growth vastly outperformed value, with the S&P 500 Growth Index returning 20% for the first three quarters of 2020 compared to the S&P 500 Value Index which returned -14%, a gap of 34%. Growth represented safety while value represented risk as cyclical companies were the most affected by the pandemic.
In the fourth quarter, as people grew weary of continued lock-downs, the market charted a new direction. With the announcement of successful vaccine trials, the mood turned decidedly risk-on. High yield outperformed investment grade, EM (including Asia) outperformed U.S. equities, local currencies rose versus the U.S. dollar, and U.S. treasury yields rose. Up until then, these fourth quarter outperformers had been among the biggest losers of the year.
Within Asian local bonds, the Philippines was the top performer in 2020, followed by Taiwan, Malaysia, and China. However, in the fourth quarter, the top performers were Indonesia and Thailand which were hit hard by the pandemic due to their reliance on tourism, as well as commodities exports in the case of Indonesia. China bonds benefited from the country’s relative success in virus containment, greater government measures to open up the local bond market to foreign investment, as well as greater foreign investment interest due to the decline in rates across the DM world.
Performance Contributors and Detractors:
The Fund’s top contribution to performance came from our overweight to U.S. dollar-denominated high yield credit and allocation to local-currency Chinese credit. However, an underweight to local rates, such as Hong Kong, Singapore and India, as well as an underweight to U.S. dollar-denominated investment grade credit detracted from performance. By currency, our overweights in Chinese renminbi, Singaporean dollar and South Korean won contributed positively, while exposures in Indian rupee and Indonesian rupiah detracted from performance.
The top contributors to Fund performance during the fourth quarter came from U.S. dollar-denominated high yield credit. In terms of country allocation, exposures to South Korea currency and Indonesian local bonds contributed. The top detractors came from China and India, where we have a slight underweight in terms of rates. Currency contributed positively to performance in the quarter, led by our overweights in Chinese renminbi and South Korean won, while the portfolio’s overweight in Indonesian rupiah detracted slightly.
Notable Portfolio Changes:
We started 2020 with a focus on boosting duration, adding investment grade-rated credit in local Chinese renminbi bonds and U.S. dollar-denominated bonds. As the virus sell-off intensified, we began to look for value among bonds most punished and continued to do so throughout the second quarter. This included adding to some perpetual bonds and highly-rated long-duration bonds, such as Geely, JD.com, and Syngenta. These bonds had suffered from illiquidity risk and the dash-for-cash panic, but are fundamentally strong companies that we believe are capable of weathering prolonged financial stress. In the third quarter, as governments worldwide focused on providing ample stimulus, the risk appetite of the market grew. We took profits on some investment grade names, such as JD.com and Weibo that had rebounded quickly. We believed value remained in many high yield bonds, which had not recovered as quickly and began boosting allocation to high yield bonds again, such as by adding Times China. We also added local currency exposure.
In the fourth quarter, we exited Chinese apparel maker Bosideng as it had rallied substantially and hit our price target. We also exited long-dated Syngenta bonds as it had rallied quite well in the recovery and we were concerned about rising rate risk associated with this long-duration bond. We added the convertible bonds of South Korean internet company Kakao (Daum) to increase exposure to the high-growth tech sector. We also added Powerlong, a commercial real estate developer in China, to diversify our Chinese real estate exposure which had been concentrated on residential development. In terms of currency, we added exposure to Indonesian rupiah, Korean won, Singaporean dollar, and Indian rupee in anticipation of local currency outperformance versus the U.S. dollar on the back of global risk-on sentiment.
Outlook:
The big question for 2021 is whether we are entering the start of a new macro trend, the much anticipated “value rotation” or cyclical risk-on. With new lockdown restrictions in countries with a new COVID strain, the value rotation could seem premature. However, governments and central banks globally seem committed to providing stimulus to help the sectors most hit by COVID—largely value sectors such as retail, banks, energy and industrials. Therefore, we think it’s unlikely that stimulus will be withdrawn before the recovery in value sectors seem more certain. As such, we believe Asia high yield credit and local currencies—considered “value” in the bond space—could continue to outperform.
With the market expecting a higher chance of U.S. stimulus and significantly more virus spread, U.S. 10-year treasury increased 23 basis points (0.23%) during the quarter. We believe U.S. interest rates have some scope to rise as inflation and economic activity normalizes in 2021, but don’t expect it to be a sharply disruptive move. In Asia, we expect to see relatively muted movements in interest rates for most countries. China bonds acted as a diversifier in the fourth quarter and we continue to believe they have the long-term potential to become a source of safety and diversification, similar to the roles played by other DM Asia rates and U.S. treasuries.
Given this backdrop, we are positioning our portfolio with a mild underweight to U.S. dollar-denominated securities and interest rate duration. We expect spreads to continue its march tighter as spreads continue to be wide relative to its history, as well as relative to similar quality issuers in U.S. and other EM regions. We also expect technicals to remain favorable as demand outstrips supply as we expect issuance from the biggest issuers, the Chinese real estate sector, to remain subdued as regulators limit leverage in the industry. In summary, we seek to position our portfolio to benefit from tail winds of credit spread tightening and Asia currency appreciation while mitigating mild headwinds from likely interest rate rises and further steepening of yield curves.
As of December 31, 2020, the securities mentioned comprised the Matthews Asia Total Return Bond Fund in the following percentages:, Times China Holdings, Ltd., 6.200%, 03/22/2026, 3.5%; Times China Holdings, Ltd., 6.750%, 07/08/2025, 1.0%; Kakao Corp., Cnv., 0.000%, 04/28/2023, 1.6%; Powerlong Real Estate Holdings, Ltd., 5.950%, 04/30/2025, 1.6%; Times China Holdings, Ltd., 6.750%, 07/08/2025, 1.0% The Fund held no positions in Geely Auto Group, JD.com, Inc.; Weibo Corp., Bosideng International Holdings Ltd. and Syngenta Group. Current and future portfolio holdings are subject to change and risk.
Average Annual Total Returns - MAINX as of 03/31/2021
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 (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 0.90% first by waiving class specific expenses (e.g., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving non-class specific expenses (e.g., custody fees) of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 0.90% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 0.90%. Any amount waived with respect to the Fund pursuant to this agreement is not subject to recoupment. This agreement will remain in place until April 30, 2021 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.
Yields as of 12/31/2020
The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 12/31/2020, 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.