11/30/2011
Inception Date
-17.95%
YTD Return
(as of 06/27/2022)
$8.32
Price
(as of 06/27/2022)
$79.95 million
Fund Assets
(as of 05/31/2022)
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.
These and other risks associated with investing in the Fund can be found in the prospectus.
| Inception Date | 11/30/2011 | |
| Fund Assets | $79.95 million (05/31/2022) | |
| Currency | USD | |
| Ticker | MAINX | |
| Cusip | 577-125-503 | |
| Portfolio Turnover | 62.2% | |
| Benchmark | 50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index | |
| Geographic Focus | Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region | |
| Gross Expense Ratio | 1.05% | |
| Net Expense Ratio | 1.05% | |
| Objective | Seeks total return over the long term with an emphasis on income. |
| Strategy | Under normal circumstances, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in income-producing securities including, but not limited to, dividend paying equity securities, and debt and debt-related instruments issued by governments, quasi-governmental entities, supra-national institutions, and companies in Asia. Investments may be denominated in any currency, and may represent any part of a company’s capital structure from debt to equity or with features of both. |
| Risks |
Investments in Asian securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Fixed income investments are subject to additional risks, including, but not limited to, interest rate, credit and inflation risks. Investing in emerging markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets.
The risks associated with investing in the Fund can be found in the prospectus |
Source: BNY Mellon Investment Servicing (US) Inc., Index data from HSBC, iBoxx (Markit). All performance is in US$.
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.
| Yield to Worst | 11.20% |
| 30-Day SEC Yield | 10.43% |
| 30-Day SEC Yield (excluding expense waiver) | 10.38% |
30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.
(as of 03/31/2022)
CATEGORY: Emerging Markets Bond
| OVERALL | 3 stars | out of 266 funds |
| 3 YEAR | 3 stars | out of 266 funds |
| 5 YEAR | 3 stars | out of 224 funds |
| 10 YEAR | 3 stars | out of 82 funds |
(as of 03/31/2022)
CATEGORY: Emerging Mrkts Hard Currency Debt Funds
| 1 YEAR | 4th | 244 out of 267 funds |
| 3 YEAR | 4th | 195 out of 250 funds |
| 5 YEAR | 3rd | 129 out of 218 funds |
| 10 YEAR | 2nd | 38 out of 87 funds |
| SINCE INCEPTION | 3rd | 49 out of 84 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.
| Modified Duration | 3.6 |
| Number of Positions | 43 |
Fund Risk Metrics are reflective of Investor share class.
Sources: Zephyr StyleADVISOR
Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.
Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.
Sector data based on Bloomberg B Class Sector.
Source: Bloomberg
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).
Source: FactSet Research Systems unless otherwise noted.
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 MSCI Emerging Markets Small Cap Index is a free float-adjusted market capitalization weighted small cap index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungry, India, Indonesia, Kuwait, 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 March 31, 2022
For quarter ending March 31, 2022, the Matthews Asia Total Return Bond Fund returned -9.79% (Investor Class) and -9.81% (Institutional Class), while its benchmark, the 50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index, returned -4.45% over the same period.
Market Environment:
Market sentiment deteriorated significantly in the first quarter of the year with the average spread for high yield 124 basis points (1.24%) wider on the quarter, driven mostly by changes in China high yield real estate. On interest rate and currency, the key themes for the first quarter were inflation and expectations of U.S. rate hikes. Inflation expectations were further exacerbated by the unexpected conflict between Russia and Ukraine which further pushed up energy prices. The latest inflation developments have caused the U.S. Federal Reserve to quicken its path of rate hikes. Higher U.S. interest rates also provided strength to the U.S. dollar, which appreciated against most Asian currencies in the first quarter. Expectations of higher U.S. interest rates and higher domestic inflation in most of Asian countries has also meant higher local interest rates.
The deterioration in China high yield real estate sector is mainly driven by continued defaults of weaker players in the sector and the lack of substantial improvement in contracted sales. While we have seen macro policies on real estate to continue to ease, the recovery is hampered by sporadic COVID-19 outbreaks in key cities such as Shenzhen and Shanghai. Sentiment deteriorated further until China’s Financial Stability and Development Committee made a public announcement reassuring the market that further policies will be implemented to stabilize the sector. Market sentiment has seen a partial recovery on the announcement while cautiously waiting for further specific policy implementation.
Performance Contributors and Detractors:
The Fund’s Chinese corporate bonds, including Logan Group, KWG Group and Times China underperformed the benchmark due to an overweight in China real estate and selection effect. All three are China real estate developers impacted by the overall China real estate tight funding conditions. On the other hand, South Korea, Philippines and Indonesia outperformed on the back of both selection and underweight relative to the benchmark. Within the corporate bond portion of the portfolio, China Development Bank, ESR Cayman, and Indika Energy were the top three contributors. China Development Bank is a government owned policy bank. ESR Cayman is a real estate investment firm with real estate assets across Asia. Indika Energy is an Indonesia energy company with businesses in power generation, procurement, and energy related construction.
Notable Portfolio Changes:
During the quarter, we exited positions that reached our price targets or had asymmetric risks to the downside. For example, we exited China pharmaceutical positions such as Hansoh Pharmaceutical and Pharmaron Beijing as regulatory risks no longer justify the risks associated with these positions. We also adjusted the portfolio’s currency exposure be more overweight U.S. dollar and underweight Asia local currencies. We believe the recent uncertainties around inflation and geopolitical risk will continue to support a strong U.S. dollar view. Lastly, we added two bond positions outside of China: Australian accounting software company Xero Investments and Thai commercial bank Bangkok Bank.
Outlook:
The unexpected conflict between Russia and Ukraine, higher prices across energy, soft and hard commodities have put further pressure on inflation. The U.S. Federal Reserve will likely err on the side of faster rate hikes and interest rates in the U.S. will be under further pressure to rise in the medium term. We believe higher U.S. rates will put pressure on Asian central banks to raise interest rate or face more currency depreciation pressures. We do not believe the next few quarters to be favorable to Asian local rates or currencies and have taken steps to reduce the portfolio’s local rates and currency exposures.
With China policy turning definitively more positive at a faster pace, we are seeing the turning point in China policy cycle. With the country’s policy cycles leading economic cycles, we expect the current environment to provide good opportunities to add risk. However, the full effectiveness of easing policies are being muted by China’s dynamic zero COVID policy leading to periodic lockdowns of major urban areas. Recent COVID outbreaks in key cities such as Shenzhen and Shanghai have put China’s annual growth target of 5.5% at risk. To reach this growth target, we expect more proactive fiscal and monetary policy to emerge in the second quarter in support of growth. Thus, we expect the weak market sentiment to continue to see higher-than-usual short-term price volatility in markets.
The biggest risks in our portfolio remain the China property companies. With China property bonds across sub-investment grade trading at distressed levels, the market is already pricing in high probabilities of restructuring. While the offshore U.S. dollar-denominated market continues to be shut to most sub-investment grade property developers, there are signs that Chinese banks might be stepping in to provide liquidity. For example, Country Garden—a property development company based in Guangdong—was able to secure a facility of 40 billion renminbi (~US$ 6 billion) from the Agricultural Bank of China as part of a strategic partnership. We are optimistic that more Chinese banks will see the opportunity to step in to be lenders of last resort to bridge the financing gap for the sector.
View the Fund’s Top 10 holdings as of March 31, 2022. Current and future holdings are subject to change and risk.
Average Annual Total Returns - MAINX as of 03/31/2022
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 fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2023. Please see the Fund’s prospectus for additional details.
Yields as of 03/31/2022
The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 03/31/2022, 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 (“YTW”) is the lowest potential yield a bond can receive without defaulting and is for the underlying bond-only portion of the portfolio, excluding securities that trade without accrued interest. YTW 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. YTW 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.