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Fixed Income

Matthews Asia Total Return Bond Fund MAINX

Snapshot
  • Unconstrained, total return strategy seeking high, risk-adjusted returns through credit, currencies and interest rates
  • Fundamental, bottom-up investment process to generate alpha
  • Designed to comple­ment an emerging market or international fixed income strategy and augment allocation to Asia

11/30/2011

Inception Date

-2.22%

YTD Return

(as of 10/26/2021)

$10.67

Price

(as of 10/26/2021)

$129.12 million

Fund Assets

(as of 09/30/2021)

Objective

Seeks total return over the long term with an emphasis on income.

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 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.

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 11/30/2011
Fund Assets $129.12 million (09/30/2021)
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
Fees & Expenses
Gross Expense Ratio 1.15%
Net Expense Ratio 1.12%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 09/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund
MAINX
-2.00% 0.06% -1.57% 3.77% 5.43% 3.87% n.a. 4.46% 11/30/2011
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
-1.81% -0.97% -2.57% 1.04% 5.57% 3.43% n.a. 4.13%
As of 09/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund
MAINX
-2.00% 0.06% -1.57% 3.77% 5.43% 3.87% n.a. 4.46% 11/30/2011
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
-1.81% -0.97% -2.57% 1.04% 5.57% 3.43% n.a. 4.13%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews Asia Total Return Bond Fund
MAINX
5.36% 13.00% -4.05% 9.40% 8.85% -0.58% 2.54% -0.50% 13.62%
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
7.95% 10.18% -0.59% 8.39% 3.79% -0.05% 6.37% -3.96% 11.59%

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.

Growth of a Hypothetical $10,000 Investment Since Inception

(as of 09/30/2021)

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 09/30/2021)
13.70% Yield to Worst
12.19% 30-Day SEC Yield
12.19% 30-Day SEC Yield (excluding expense waiver)

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

Ratings

  • OVERALL
  • out of 255 funds
  • 3 YEAR
  • out of 255 funds
  • 5 YEAR
  • out of 214 funds
  • 1 YEAR
  • 4th
  • 235 out of 265 funds
  • 3 YEAR
  • 3rd
  • 128 out of 243 funds
  • 5 YEAR
  • 2nd
  • 93 out of 213 funds
  • SINCE INCEPTION
  • 3rd
  • 45 out of 85 funds

Ratings agency calculation methodology

Portfolio Managers

Teresa  Kong, CFA photo
Teresa Kong, CFA

Lead Manager

Satya  Patel photo
Satya Patel

Co-Manager

Wei  Zhang photo
Wei Zhang

Co-Manager

Portfolio Characteristics

(as of 09/30/2021)
3.9
Modified Duration
51
Number of Positions

Source: BNY Mellon Investment Servicing (US) Inc.

Top 10 Positions

(as of 09/30/2021)
Name Sector Currency % Net Assets
Wanda Properties International Co., Ltd., 7.250%, 01/29/2024 Real Estate U.S. Dollar 4.0
Luye Pharma Group, Ltd., Cnv., 1.500%, 07/09/2024 Health Care U.S. Dollar 3.7
China Development Bank, 3.800%, 01/25/2036 Foreign Government Bonds China Renminbi 3.7
Franshion Brilliant, Ltd., 6.000%, 08/08/2068 Real Estate U.S. Dollar 3.6
KWG Group Holdings, Ltd., 7.400%, 01/13/2027 Real Estate U.S. Dollar 3.6
Sino-Ocean Land Treasure III, Ltd., 4.900%, 03/21/2068 Real Estate U.S. Dollar 3.3
Kasikornbank Public Co., Ltd., 5.275%, 04/14/2068 Financials U.S. Dollar 3.2
Baozun, Inc., Cnv., 1.625%, 05/01/2024 Consumer Discretionary U.S. Dollar 3.1
ABJA Investment Co. Pte, Ltd., 5.450%, 01/24/2028 Materials U.S. Dollar 3.1
Network i2i, Ltd., 5.650%, 04/15/2068 Communication Services U.S. Dollar 3.1
TOTAL 34.4

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 09/30/2021)
  • Sector Allocation
  • Country Allocation
  • Currency Allocation
  • Quality Distribution
  • Asset Type Breakdown
Sector Fund
Real Estate 28.0
Financials 19.4
Foreign Government Bonds 16.3
Consumer Discretionary 10.0
Health Care 7.1
Materials 6.1
Communication Services 5.0
Energy 3.4
Industrials 1.6
Information Technology 1.4
Cash and Other Assets, Less Liabilities 1.7

"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 60.3
India 13.1
Indonesia 9.4
Thailand 4.8
Malaysia 4.2
Philippines 3.4
Vietnam 2.3
South Korea 0.8
Cash and Other Assets, Less Liabilities 1.7

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 55.6 2.0
China Renminbi 11.6 0.6
South Korean Won 9.2 0.0
Singapore Dollar 6.4 0.1
Indonesian Rupiah 4.9 0.3
Malaysian Ringgit 4.5 0.4
Philippines Peso 4.1 0.0
Thailand Baht 3.7 0.4

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

Quality Distribution Fund
A- 4.2
BBB+ 1.6
BBB 6.8
BBB- 0.5
BB+ 5.8
BB 18.6
BB- 16.5
B+ 7.0
B 3.7
CCC+ 1.9
Not Rated 31.7
Cash and Other Assets, Less Liabilities 1.7

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 67.7
Convertible Bonds 15.7
Government Bonds 14.9
Cash and Other Assets, Less Liabilities 1.7

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)
10/25/2021 10/26/2021 $0.03866 $0.00000 $0.00000 $0.03866 0.4% N.A.
09/27/2021 09/28/2021 $0.02919 $0.00000 $0.00000 $0.02919 0.3% N.A.
08/25/2021 08/26/2021 $0.03489 $0.00000 $0.00000 $0.03489 0.3% N.A.
07/26/2021 07/27/2021 $0.03277 $0.00000 $0.00000 $0.03277 0.3% N.A.
06/28/2021 06/29/2021 $0.03508 $0.00000 $0.00000 $0.03508 0.3% N.A.
05/25/2021 05/26/2021 $0.03462 $0.00000 $0.00000 $0.03462 0.3% N.A.
04/26/2021 04/27/2021 $0.03792 $0.00000 $0.00000 $0.03792 0.4% N.A.
03/24/2021 03/25/2021 $0.03311 $0.00000 $0.00000 $0.03311 0.3% N.A.
02/22/2021 02/23/2021 $0.02286 $0.00000 $0.00000 $0.02286 0.2% N.A.
01/25/2021 01/26/2021 $0.03261 $0.00000 $0.00000 $0.03261 0.3% N.A.
12/15/2020 12/16/2020 $0.08400 $0.00000 $0.00000 $0.08400 0.8% N.A.
11/18/2020 11/19/2020 $0.03377 $0.00000 $0.00000 $0.03377 0.3% N.A.
10/26/2020 10/27/2020 $0.03521 $0.00000 $0.00000 $0.03521 0.3% N.A.
09/28/2020 09/29/2020 $0.03922 $0.00000 $0.00000 $0.03922 0.4% N.A.
08/27/2020 08/27/2020 $0.03914 $0.00000 $0.00000 $0.03914 0.4% N.A.
07/27/2020 07/28/2020 $0.03460 $0.00000 $0.00000 $0.03460 0.3% N.A.
06/24/2020 06/25/2020 $0.03790 $0.00000 $0.00000 $0.03790 0.4% N.A.
05/26/2020 05/27/2020 $0.02973 $0.00000 $0.00000 $0.02973 0.3% N.A.
04/27/2020 04/28/2020 $0.00347 $0.00000 $0.00000 $0.00347 0.0% N.A.
03/25/2020 03/26/2020 $0.03723 $0.00000 $0.00000 $0.03723 0.4% N.A.
02/26/2020 02/27/2020 $0.06300 $0.00000 $0.00000 $0.06300 0.6% 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 September 30, 2021

For the quarter ending September 30, 2021, the Matthews Asia Total Return Bond Fund returned 0.06% (Investor Class) and 0.11% (Institutional Class), while its benchmark, the 50% Markit iBoxx Asian Local Bond/50% J.P. Morgan Asia Credit Index, returned -0.97% over the same period.

Market Environment:

The third quarter has been a rollercoaster ride in Asian markets largely in response to policies from China. With new regulations coming out of China on education, fintech, internet platforms, online gaming, gambling and real estate, the market scrambled to price potential implications. The high frequency of new regulations has also caught the market by surprise. While any single policy change can be expected and digested by markets, this high frequency has led markets to price in the worst expectation before any proper analysis can take place. Slowdown in the real estate sector in China was another significant development. The slowdown, combined with potential failure of China Evergrande Group, one of the largest property developers in China, hurt market sentiment. On the other side of the Pacific, U.S. interest rates increased due to concerns of inflation being longer lasting than the U.S. Fed’s initial guidance and its potential response to the longer lasting inflation.

Performance Contributors and Detractors:

For the third quarter, our holdings in Huarong Finance, a large asset management company in China, was the biggest contributor to the Fund’s performance.  A consortium led by CITIC Group Corp. agreed to inject capital and effectively take over the management of the institution. This resulted in a significant recovery in Huarong’s bond price. Outside of China, the Fund’s holding in Pan Brothers, an Indonesian textile manufacturer contributed to performance. The company has indicated that it remains on-track to refinance its liabilities. Thailand was also a relative positive contributor to the Fund’s performance. The Fund benefited from being underweight to the Thai baht (THB). The various COVID variants posed significant challenges to the reopening of the Thai manufacturing and tourism sectors, resulting in weaker-than-expected economic recovery and currency. THB was the worst-performing Asian currency for the quarter, returning -5.26% for the quarter.

The Fund’s performance detractors were mostly convertible bond holdings in China and South Korea. Due to the numerous regulations from China on internet platforms, internet convertible bond holdings such as web-based shopping platform Meituan and e-commerce and marketing solutions company Weimob were detractors during the quarter. South Korean internet platform convertible bond holding Kakao Corp., was also a detractor during the quarter due to increased regulation from South Korea.

Notable Portfolio Changes:

Portfolio changes during the quarter were concentrated in China.  We reduced positions that have met the target yield and added to positions that represent attractive yield given the fundamental credit quality. In particular, we exited Chinese developer Powerlong Real Estate and Citic Telecom. We added to high quality real estate developers such as KWG Group Holdings, Logan Group, and Times China. In addition to real estate, we also added to convertible bond holdings in Baozun Inc and iQIYI Inc. These issuers represent a subset of the convertible bond issuers which have strong liquidity to support debt repayment while still offering attractive yield to put. Despite the ongoing regulatory headwinds in China, we believe these issuers represent a good opportunity to capture the attractive yield even assuming zero upside to the underlying equity.

Outlook:

With increasing likelihood that China is entering a period of slowdown and weaker sentiment across Asia, risks to a broad recovery have increased. We expect China to respond with increasingly easy policy by year end, as they have historically done, to offset economic weakness. This has already begun, as evidenced by the government’s directive to energy producers to “do whatever it takes” to procure energy supplies for the winter in light of global shortages. Over the coming months, we expect policy makers to turn their focus to real estate, which has been hit hard by the default of a large developer and slowing sales. This is likely to include continued injection of liquidity through People’s Bank of China’s open market operations as well as lifting of the mortgage quota which has limited mortgage lending by banks.  With a myriad of countercyclical policy tools at China’s disposal, we expect a material turnaround in sentiment and real economic activity in the coming quarters in China, which should have a positive spillover effect for the rest of Asia.  With policy cycles in China often leading economic cycles, we expect that turning points in China policy represent good potential opportunities to add risk and capture alpha.

 

As of September 30, 2021, the securities mentioned comprised the Matthews Asia Total Return Bond Fund in the following percentages: Huarong Finance 2019 Co., Ltd., 4.250%, 03/30/2068, 1.8%; Huarong Finance 2017 Co., Ltd., 4.500%, 07/24/2068, 0.8%; PB (Pan Brothers) International BV, 7.625%, 01/26/2022, 1.9%; Meituan, Cnv., 0.000%, 04/27/2028 0.5%; Weimob Investment, Ltd., Cnv., 0.000%, 06/07/2026, 1.4%, Kakao Corp., Cnv., 0.000%, 04/28/2023, 0.8%; Baozun, Inc., Cnv., 1.625%, 05/01/2024, 3.1%; iQIYI, Inc., Cnv., 2.000%, 04/01/2025, 1.2%; KWG Group Holdings, Ltd., 7.400%, 01/13/2027, 3.6%; Logan Group Co., Ltd., 4.500%, 01/13/2028, 0.5%; Times China Holdings, Ltd., 6.200%, 03/22/2026, 2.7%. The Fund held no positions in China Evergrande Group, Powerlong Real Estate, or CITIC Telecom.

Current and future portfolio holdings are subject to change and risk.

 

Average Annual Total Returns - MAINX as of 09/30/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
3.77% 5.43% 3.87% N.A. 4.46% 11/30/2011

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%
Net Expense Ratio 1.12%

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 09/30/2021
Yield to Worst 13.70%
30-Day SEC Yield 12.19%
30-Day SEC Yield (excluding expense waiver) 12.19%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 09/30/2021, 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.