09/15/2008
Inception Date
-15.98%
YTD Return
(as of 06/27/2022)
$25.14
Price
(as of 06/27/2022)
$369.25 million
Fund Assets
(as of 05/31/2022)
Long-term capital appreciation
Under normal circumstances, the Matthews Emerging Markets Small Companies Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of Small Companies located in emerging market countries. Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe. Certain emerging market countries may also be classified as “frontier” market countries, which are a subset of emerging market countries with newer or even less developed economies and markets, such as Sri Lanka and Vietnam. The list of emerging market countries and frontier market countries may change from time to time. The Fund defines Small Companies as companies with market capitalization no higher than the greater of US $5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI Emerging Markets Small Cap Index.
Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier securities involves greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.
These and other risks associated with investing in the Fund can be found in the prospectus.
| Inception Date | 09/15/2008 | |
| Fund Assets | $369.25 million (05/31/2022) | |
| Currency | USD | |
| Ticker | MSMLX | |
| Cusip | 577-125-206 | |
| Portfolio Turnover | 50.8% | |
| Benchmark | MSCI Emerging Markets Small Cap Index MSCI All Country Asia ex Japan Small Cap Index | |
| Geographic Focus | Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe. | |
| Gross Expense Ratio | 1.51% | |
| Net Expense Ratio | 1.35% | |
| Objective | Long-term capital appreciation |
| Strategy | Under normal circumstances, the Matthews Emerging Markets Small Companies Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of Small Companies located in emerging market countries. Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe. Certain emerging market countries may also be classified as “frontier” market countries, which are a subset of emerging market countries with newer or even less developed economies and markets, such as Sri Lanka and Vietnam. The list of emerging market countries and frontier market countries may change from time to time. The Fund defines Small Companies as companies with market capitalization no higher than the greater of US $5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI Emerging Markets Small Cap Index. |
| Risks |
Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier securities involves greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.
The risks associated with investing in the Fund can be found in the prospectus |
Effective April 30, 2021, in connection with changes to the Fund’s name and principal investment strategies, the primary benchmark changed from the MSCI All Country Asia ex Japan Small Cap Index to the MSCI Emerging Markets Small Cap Index.
Before April 30, 2021, the Fund was managed with a materially different investment strategy and may have achieved materially different performance results under its current investment strategy from the performance shown for periods before that date.
MSCI AC Asia ex Japan Small Cap Index since inception value calculated from 9/15/08.
Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.
Assumes reinvestment of all dividends and/or distributions before taxes. All performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate with market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived. Performance differences between the Institutional class and the Investor class may arise due to differences in fees charged to each class.
Additional performance, attribution, liquidity, value at risk (VaR), security classification and holdings information is available on request for certain time periods.
MSCI AC Asia ex Japan Small Cap Index since inception value calculated from 9/15/08.
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.
(as of 03/31/2022)
CATEGORY: Pacific/Asia ex-Japan Stk
| OVERALL | 5 stars | out of 52 funds |
| 3 YEAR | 5 stars | out of 52 funds |
| 5 YEAR | 5 stars | out of 46 funds |
| 10 YEAR | 5 stars | out of 34 funds |
(as of 03/31/2022)
CATEGORY: Emerging Markets Funds
| 1 YEAR | 1st | 15 out of 777 funds |
| 3 YEAR | 1st | 4 out of 703 funds |
| 5 YEAR | 1st | 13 out of 600 funds |
| 10 YEAR | 1st | 5 out of 339 funds |
| SINCE INCEPTION | 1st | 1 out of 206 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
Vivek Tanneeru is a Portfolio Manager at Matthews Asia and manages the firm’s Asia ESG, Emerging Markets Small Companies and Asia Small Companies Strategies. Prior to joining Matthews Asia in 2011, Vivek was an Investment Manager on the Global Emerging Markets team of Pictet Asset Management in London. While at Pictet, he also worked on the firm’s Global Equities team, managing Japan and Asia ex-Japan markets. Before earning his MBA from the London Business School in 2006, Vivek was a Business Systems Officer at The World Bank and served as a Consultant at Arthur Andersen Business Consulting and Citicorp Infotech Industries. He interned at Generation Investment Management while studying for his MBA Vivek received his Master’s in Finance from the Birla Institute of Technology & Science in India. He is fluent in Hindi and Telugu.
Co-Manager
Portfolio Manager
Jeremy Sutch is a Portfolio Manager at Matthews Asia and co-manages the firm’s Emerging Markets Small Companies and Asia Small Companies Strategies. Prior to joining the firm in 2015, he was Director and Global Head of Emerging Companies at Standard Chartered Bank in Hong Kong from 2012 to 2015, responsible for the fundamental analysis of companies in Asia, with a particular focus on small- and mid-capitalization companies. From 2009 to 2012, he was Managing Director at MJP Capital in Hong Kong, which he co-founded. His prior experience has included managing small-cap equities at Indus Capital Advisors and serving as Head of Hong Kong Research for ABN AMRO Asia Securities. Jeremy earned an M.A. in French and History from the University of Edinburgh.
Sources: Factset Research Systems, Inc.
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.
Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.
Not all countries are included in the benchmark index(es).
The Portfolio’s market cap exposure breakdown presented is used for comparison purposes and the definition of the capitalization breakdown is from MSCI.
The Fund defines Small Companies as companies with market capitalization no higher than the greater of US$5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI Emerging Markets Small Cap Index.
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.
Portfolio Breakdown benchmark reflects the MSCI Emerging Markets Small Cap Index as of 3/31/22.
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 the first quarter of the year, the Fund returned -11.13% (Investor Class) and -11.08% (Institutional Class), while its benchmark, the MSCI Emerging Markets Small Cap Index, returned -4.27% over the same period.
Market Environment:
The first quarter brought sharp changes to the emerging markets small-cap landscape. The notion that inflation is more embedded than transitory gained traction while Russia’s invasion of Ukraine led to a rapid reassessment of geopolitical, energy and defense priorities globally. The market sentiment this created didn’t support growth stocks and energy and commodity prices rallied on concerns over supply disruptions. Weakness in Chinese equities also continued, fueled by the ongoing delisting threat to Chinese ADRs, economic cost of China’s zero-COVID policy and concerns over China’s stance over the Ukraine invasion.
Energy was the best performing sector among emerging market-small cap equity indexes while communication services and health care were the worst performers. The Latin American countries of Peru, Brazil, Chile, Mexico and Colombia were the best-performing emerging markets while South Africa, Kuwait and Saudi Arabia also did well. The worst performing markets were energy and commodity importers such as Egypt, South Korea, Taiwan and China. Eastern European markets were also challenged and Russian equities were removed from MSCI indexes, effectively marking them at zero.
During the quarter, the best-performing emerging markets currencies against the U.S. dollar were the Brazil real, the South African rand, the Peruvian sol, the Chilean peso and the Colombian peso. The Turkish lira and the Russian ruble were the worst performers.
Performance Contributors and Detractors:
From a country perspective, the portfolio’s overweight allocation and stock selection within India contributed the most to the Fund’s relative performance during the quarter, followed by Vietnam. On the other hand the portfolio’s overweight allocation and stock selection within China/Hong Kong detracted the most from the Fund’s absolute and relative performance.
At the sector level, stock selection within consumer discretionary, overweight in financials and underweight in communication services added to performance. Consumer discretionary stocks contributed most to performance during the quarter as economic activity in general and consumer services spending in areas such as travel, in-person shopping and hotels, in particular, rebounded strongly in Asia and elsewhere. On the other hand, stock selection within information technology, industrials and health care detracted most from performance. In light of market’s fast-evolving rate expectations and the energy and commodity price spikes during the quarter, the rotation away from expensive growth stocks continued apace. This has particularly negatively impacted high growth sectors such as technology and biotech, which had done well last year.
Among individual holdings, positive contributors included Bandhan Bank, India’s largest microfinance lender. After several quarters of turbulence on the back of COVID lockdowns and general weakness in India’s rural economy, Bandhan’s operations have seemingly stabilized and problem assets mostly provided for, giving a positive background for Bandhan’s stock price. As the Indian economy bounces back to normalcy, we expect Bandhan’s formidable rural franchise to deliver strong growth and profitability in the coming quarters and years. On the other hand, the portfolio’s health-care holdings in China, including Innovent Biologics, were impacted by potential changes in clinical trial design requirements for the U.S Food and Drug Administration (FDA).
Notable Portfolio Changes:
During the quarter, the fund initiated a new position in Banco Pan SA, a small-cap Brazilian bank that specializes in payroll and auto loans. We saw an attractive entry point after its share price had weakened due to market concerns over asset quality. We believe the bank has materially improved governance and management over the past few years, has a large-collateralized book and a well-executed digital strategy.
In the quarter, our exits included small stub positions held in Indian Railway Catering & Tourism and Wilcon Depot.
Outlook:
Fed moves to raise interest rates and shrink its asset portfolio, together with market expectations for the Fed’s monetary tightening plan, remain the most important variables to watch given their near-term implications for regional, sector and style performance. From a portfolio standpoint, we will look to maintain a balance between growth and value exposure while staying broadly diversified across sectors and countries. We remain watchful about the impact of inflation on corporate earnings, which we expect to moderate in 2022.
Across emerging markets we believe there is sufficient liquidity and there are early signs of the rate hiking cycle coming to a potential close in commodity-orientated markets like Brazil. While we have not seen much uptake in credit, any pickup in credit issuance should further support economic growth. In many parts of the emerging markets, the COVID-19 vaccination is progressing well and provides hope for economic activity normalization in the coming quarters. Barring another serious pandemic wave, we believe small companies are poised for attractive growth at attractive valuations.
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 - MSMLX 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.
Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier securities involves greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.