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Matthews Asia Innovators Fund
MATFX

Snapshot
  • High-conviction, concentrated equity portfolio of innovative companies in Asia
  • All-cap fundamental approach focused on companies with unique offerings that create or expand markets
  • Capitalizing on the new economy and the rising disposable income in Asia

12/27/1999

Inception Date

4.95%

YTD Return

(as of 02/27/2024)

$11.66

NAV

(as of 02/27/2024)

-0.03

1 Day NAV Change

(as of 02/27/2024)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Asia Innovators 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 companies located in Asia that Matthews believes are innovators in their products, services, processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets. The Fund seeks to invest in companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health.

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. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. Sector funds may be subject to a higher degree of market risk than diversified funds because of a concentration in a specific sector. The Fund's value may be affected by changes in the science and technology-related industries.

These and other risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 12/27/1999
Fund Assets $291.88 million (01/31/2024)
Currency USD
Ticker MATFX
Cusip 577-130-883
Portfolio Turnover 118.1%
Benchmark MSCI All Country Asia ex Japan Index
Geographic Focus Asia ex Japan - Consists of all countries and markets in Asia excluding Japan, but including all other developed, emerging, and frontier countries and markets in the Asian region
Fees & Expenses
Gross Expense Ratio 1.18%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 01/31/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund - MATFX
12/27/1999
MATFX
-2.25% 7.74% -2.25% -13.47% -16.23% 7.23% 7.47% 4.09%
MSCI All Country Asia ex Japan Index
-5.44% 4.72% -5.44% -7.09% -9.38% 1.41% 4.12% 5.19%
As of 12/31/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund - MATFX
12/27/1999
MATFX
1.56% 6.12% -1.77% -1.77% -13.74% 9.21% 7.20% 4.20%
MSCI All Country Asia ex Japan Index
3.55% 6.48% 6.34% 6.34% -6.43% 4.01% 4.17% 5.45%
For the years ended December 31st
Name 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
Matthews Asia Innovators Fund - MATFX
MATFX
-1.77% -24.80% -13.10% 86.72% 29.60% -18.62% 52.88% -9.10% 4.48% 9.24%
MSCI All Country Asia ex Japan Index
6.34% -19.36% -4.46% 25.36% 18.52% -14.12% 42.08% 5.76% -8.90% 5.11%

MSCI AC Asia Ex Japan Index since inception value calculated from 12/31/99.

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.

Growth of a Hypothetical $10,000 Investment Since Inception

(as of 12/31/2023)

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.

Ratings

  • OVERALL
  • out of 46 funds
  • 3 YEAR
  • out of 46 funds
  • 5 YEAR
  • out of 46 funds
  • 10 YEAR
  • out of 33 funds
  • 1 YEAR
  • 4th
  • 31 out of 39 funds
  • 3 YEAR
  • 4th
  • 33 out of 37 funds
  • 5 YEAR
  • 1st
  • 2 out of 37 funds
  • 10 YEAR
  • 1st
  • 2 out of 24 funds
  • SINCE INCEPTION
  • 4th
  • 8 out of 8 funds

Ratings agency calculation methodology

Portfolio Managers

Michael J. Oh, CFA photo
Michael J. Oh, CFA

Lead Manager

Inbok  Song photo
Inbok Song

Co-Manager

Portfolio Characteristics

(as of 12/31/2023)
Fund Benchmark
Number of Positions 49 1,249
Weighted Average Market Cap $187.8 billion $117.1 billion
Active Share 69.8 n.a.
P/E using FY1 estimates 22.6x 13.9x
P/E using FY2 estimates 17.7x 12.1x
Price/Cash Flow 14.0 7.1
Price/Book 3.2 1.6
Return On Equity 18.5 15.7
EPS Growth (3 Yr) 33.7% 19.5%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 12/31/2023)
-5.54%
Alpha
1.18
Beta
106.35%
Upside Capture
123.94%
Downside Capture
-0.65
Sharpe Ratio
-0.69
Information Ratio
10.62%
Tracking Error
82.99

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 01/31/2024)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 9.8
Samsung Electronics Co., Ltd. Information Technology South Korea 5.0
NVIDIA Corp. Information Technology United States 4.7
PDD Holdings, Inc. Consumer Discretionary China/Hong Kong 4.5
Reliance Industries, Ltd. Energy India 3.6
Zomato, Ltd. Consumer Discretionary India 3.4
PT Bank Rakyat Indonesia Persero Tbk Financials Indonesia 3.2
Alchip Technologies, Ltd. Information Technology Taiwan 3.1
New Oriental Education & Technology Group, Inc. Consumer Discretionary China/Hong Kong 3.0
Alibaba Group Holding, Ltd. Consumer Discretionary China/Hong Kong 2.5
TOTAL 42.8

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 12/31/2023)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 33.0 25.6 7.4
Consumer Discretionary 25.7 14.0 11.7
Financials 18.5 20.6 -2.1
Industrials 7.2 7.6 -0.4
Communication Services 5.9 9.1 -3.2
Energy 3.2 3.7 -0.5
Health Care 3.1 3.9 -0.8
Consumer Staples 1.2 4.8 -3.6
Real Estate 1.0 3.1 -2.1
Materials 0.0 5.1 -5.1
Utilities 0.0 2.6 -2.6
Cash and Other Assets, Less Liabilities 1.1 0.0 1.1

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

Country Fund Benchmark Difference
China/Hong Kong 32.9 36.6 -3.7
India 25.6 19.5 6.1
Taiwan 14.9 18.5 -3.6
South Korea 14.0 15.1 -1.1
United States 5.0 0.0 5.0
Indonesia 3.5 2.2 1.3
Netherlands 1.9 0.0 1.9
Brazil 1.1 0.0 1.1
Singapore 0.0 3.7 -3.7
Thailand 0.0 2.0 -2.0
Malaysia 0.0 1.5 -1.5
Philippines 0.0 0.7 -0.7
Macau 0.0 0.2 -0.2
Cash and Other Assets, Less Liabilities 1.1 0.0 1.1

Not all countries are included in the benchmark index(es).

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 72.8 58.3 14.5
Large Cap ($10B-$25B) 14.3 21.9 -7.6
Mid Cap ($3B-$10B) 11.7 18.4 -6.7
Small Cap (under $3B) 0.1 1.5 -1.4
Cash and Other Assets, Less Liabilities 1.1 0.0 1.1

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)
12/13/2023 12/14/2023 $0.00018 $0.00000 $0.00000 $0.00018 0.0% N.A.
12/13/2022 12/14/2022 $0.00000 $0.00000 $3.00231 $3.00231 20.4% N.A.
View History

 

There is no guarantee that the Fund will pay or continue to pay distributions. 

Past performance is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost.

Commentary

Period ended December 31, 2023

For the year ending December 31, 2023, the Matthews Asia Innovators Fund returned -1.77% (Investor Class) and -1.62% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned 6.34% over the same period. For the fourth quarter, the Fund returned 6.12% (Investor Class) and 6.14% (Institutional Class), while the benchmark returned 6.48%.

Market Environment 

2023 was challenging on many levels for Asia equity markets. At the macro level, rising interest rates and a strong U.S. dollar were headwinds for the region. Growth companies were out of favor while value companies relatively outperformed. Geopolitical tensions between the U.S. and China also remained elevated, particularly in the first half, and we expect these tensions to continue. The most notable feature, however, was the prolonged weakness of the Chinese economy. The rapid post-COVID recovery that many investors expected didn’t materialize and the country instead struggled with a lack of confidence and problems in specific sectors like real estate. Mitigating China’s woes somewhat was India’s continued resilient growth, supported in part by its domestic infrastructure programs and increasing global trade. Information technology (IT) was the largest contributor to returns in the region, while communication services was among the laggards. Toward the end of the year, there was a general consensus that inflation had peaked in the global economy and that the U.S. Federal Reserve would pivot toward cutting rates in 2024 and the dollar would weaken. This provided some tailwinds across the region in the final quarter of 2023. 

Performance Contributors and Detractors 

Regionally, our overweight and stock selection in China/Hong Kong was the biggest detractor to relative and total returns in 2023. Our exposure was hurt by the much slower-than-expected recovery in China, international concerns over geopolitical risks, and regulatory uncertainties related to technology companies. Stock selection in India and South Korea also detracted from returns, as did an underweight in Taiwan, which rallied last year. On the other hand, an off-benchmark allocation to the U.S. contributed the most to relative returns. We invest in companies that are generating more than 50% of their revenue from Asia but are not necessarily based in Asia. An underweight to Thailand and lack of exposure to Malaysia also contributed.

At the sector level, stock selections in communication services and health care were the biggest detractors from relative returns. In contrast, stock selection in real estate was the top contributor; a lack of exposure to utilities and materials, and an overweight in IT also contributed. 

On a company basis, Alchip was the biggest contributor to relative returns last year. The Taiwan-based provider of silicon designs and manufacturing services for the chip industry is well positioned, we believe, to benefit from on-going developments in the artificial intelligence (AI) industry. PDD Holdings, operator of the Pinduoduo ecommerce app, was another big contributor to total and relative returns. PDD has been gaining market share in China and its overseas unit, Temu, has been growing rapidly. 

Ecommerce giant Alibaba was the biggest detractor to returns and Kuaishou Technology, a video-sharing platform, also detracted. Alibaba’s topline growth slowed in 2023 and it lost market share to competitors. Kuaishou’s fundamentals are still sound in our view, but the stock has suffered amid ongoing uncertainties around China’s regulatory environment.  

Notable Portfolio Changes 

We reduced our China exposure in the portfolio last quarter as we feel the opportunity set has shrunk due to higher regulatory risks, a persisting weak domestic economy and soft consumer sentiment. Among our exits were Alibaba, digital services platform Baidu, video platform Bilibili and Kuaishou Technology. On the other hand, we added Godrej Consumer Products, an India-based consumer staples company, and Shenzhen-based BYD Company, the world’s largest maker of electric vehicles (EVs). In India, consumer staples is one area that will continue to see stable growth going forward, in our view, and Godrej Consumer Products is well positioned to benefit. BYD surpassed the EV market share of Tesla in the last quarter. We are focusing on Chinese companies with competitive international business models and BYD fits into this strategy well. 

Outlook 

Overall we’re optimistic for 2024. We pivoted during the last quarter of the year to adjust the country weightings in the portfolio to address the on-going evolution in the region. China remains challenging. We believe the government is not making necessary reforms to improve its domestic economy and unless we see a firm change in policies and an improvement in the regulatory environment we will maintain a cautious view on the Chinese equity market. 

In contrast, we are optimistic on India. It doesn’t have the same issues that have negatively impacted the Chinese market and, in many ways, India has the potential to replicate the success that China has had in the past 20 years. Valuations, however, remain elevated and we will be very selective in picking our investments. 

More generally, the semiconductor industry is passing the bottom of the cycle and Asia maintains its leading edge when it comes to the foundry and the memory segments, which are the backbone of the global industry. The consumer market in Asia also remains the largest and fastest growing market in the world and provides a great foundation for innovation and entrepreneurship to flourish.

 

View the Fund’s Top 10 holdings as of December 31, 2023. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MATFX as of 12/31/2023
1YR 3YR 5YR 10YR Since Inception Inception Date
-1.77% -13.74% 9.21% 7.20% 4.20% 12/27/1999

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 1.18%

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. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. Sector funds may be subject to a higher degree of market risk than diversified funds because of a concentration in a specific sector. The Fund's value may be affected by changes in the science and technology-related industries.

 

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.