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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

-0.89%

YTD Return

(as of 03/21/2023)

$11.21

NAV

(as of 03/21/2023)

+0.21

1 Day NAV Change

(as of 03/21/2023)

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 $490.56 million (02/28/2023)
Currency USD
Ticker MATFX
Cusip 577-130-883
Portfolio Turnover 118.1%
Benchmark MSCI All Country Asia ex Japan 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 1.09%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 02/28/2023
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
-10.52% -1.66% -0.71% -15.88% 6.19% 4.63% 10.45% 4.41%
MSCI All Country Asia ex Japan Index
-6.81% 0.71% 0.85% -14.07% 1.62% -0.61% 3.79% 5.41%
As of 12/31/2022
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
-0.96% 8.51% -24.80% -24.80% 6.86% 5.17% 10.72% 4.47%
MSCI All Country Asia ex Japan Index
-0.14% 11.43% -19.36% -19.36% -1.15% -0.34% 3.87% 5.41%
For the years ended December 31st
Name 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
Matthews Asia Innovators Fund - MATFX
MATFX
-24.80% -13.10% 86.72% 29.60% -18.62% 52.88% -9.10% 4.48% 9.24% 35.61%
MSCI All Country Asia ex Japan Index
-19.36% -4.46% 25.36% 18.52% -14.12% 42.08% 5.76% -8.90% 5.11% 3.34%

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 12/31/2022)

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 48 funds
  • 3 YEAR
  • out of 48 funds
  • 5 YEAR
  • out of 44 funds
  • 10 YEAR
  • out of 32 funds
  • 1 YEAR
  • 4th
  • 26 out of 32 funds
  • 3 YEAR
  • 1st
  • 2 out of 31 funds
  • 5 YEAR
  • 1st
  • 2 out of 29 funds
  • 10 YEAR
  • 1st
  • 1 out of 18 funds
  • SINCE INCEPTION
  • 4th
  • 8 out of 9 funds

Ratings agency calculation methodology

Portfolio Managers

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

Lead Manager

Taizo  Ishida photo
Taizo Ishida

Co-Manager

Portfolio Characteristics

(as of 12/31/2022)
Fund Benchmark
Number of Positions 33 1,187
Weighted Average Market Cap $104.4 billion $99.5 billion
Active Share 76.9 n.a.
P/E using FY1 estimates 23.7x 11.8x
P/E using FY2 estimates 20.3x 11.8x
Price/Cash Flow 16.8 6.8
Price/Book 3.3 1.5
Return On Equity 0.8 14.5
EPS Growth (3 Yr) -33.1% 9.8%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 12/31/2022)
9.66%
Alpha
1.16
Beta
135.87%
Upside Capture
96.67%
Downside Capture
0.22
Sharpe Ratio
0.59
Information Ratio
13.51%
Tracking Error
77.57

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 02/28/2023)
Name Sector Country % Net Assets
Tencent Holdings, Ltd. Communication Services China/Hong Kong 6.0
Alibaba Group Holding, Ltd. Consumer Discretionary China/Hong Kong 5.5
PDD Holdings, Inc. Consumer Discretionary China/Hong Kong 5.2
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 5.2
Trip.com Group, Ltd. Consumer Discretionary China/Hong Kong 5.1
Samsung Electronics Co., Ltd. Information Technology South Korea 4.8
KE Holdings, Inc. Real Estate China/Hong Kong 4.5
H World Group, Ltd. Consumer Discretionary China/Hong Kong 3.9
Meituan Consumer Discretionary China/Hong Kong 3.5
Sea, Ltd. Communication Services Singapore 3.3
TOTAL 47.0

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 12/31/2022)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 35.3 15.0 20.3
Communication Services 18.0 9.9 8.1
Financials 14.5 21.5 -7.0
Information Technology 9.6 21.0 -11.4
Consumer Staples 8.9 5.5 3.4
Industrials 5.3 6.8 -1.5
Real Estate 4.1 4.0 0.1
Energy 2.0 3.7 -1.7
Health Care 1.6 4.1 -2.5
Materials 0.0 5.4 -5.4
Utilities 0.0 3.1 -3.1
Cash and Other Assets, Less Liabilities 0.6 0.0 0.6

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 68.6 44.3 24.3
India 15.9 16.3 -0.4
South Korea 5.7 12.8 -7.1
Singapore 5.1 3.9 1.2
Taiwan 2.0 15.4 -13.4
Vietnam 2.0 0.0 2.0
Thailand 0.0 2.5 -2.5
Indonesia 0.0 2.2 -2.2
Malaysia 0.0 1.8 -1.8
Philippines 0.0 0.8 -0.8
Cash and Other Assets, Less Liabilities 0.6 0.0 0.6

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 62.6 56.5 6.1
Large Cap ($10B-$25B) 22.9 22.5 0.4
Mid Cap ($3B-$10B) 10.5 19.3 -8.8
Small Cap (under $3B) 3.3 1.6 1.7
Cash and Other Assets, Less Liabilities 0.6 0.0 0.6

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)
12/13/2022 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, 2022

For the year ending December 31, 2022, the Matthews Asia Innovators Fund returned -24.80% (Investor Class) and -24.73% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -19.36% over the same period. For the fourth quarter of the year, the fund returned 8.51% (Investor Class) and 8.48% (Institutional Class), while the MSCI All Country Asia ex Japan Index returned 11.43%.

Market Environment:

2022 was another challenging year for Asian markets, particularly Taiwan, South Korea and China—the latter as the country’s ongoing zero-COVID policy materially impacted the domestic economy. Further pressuring China’s markets were ongoing concerns about the government’s regulatory interventions across sectors including technology and health care, as well as the challenges facing the country’s real estate sector. This combination weighed on investor sentiment and, in turn, market returns throughout the year.

Fortunately, starting in December, China’s government started to rapidly dismantle its zero-COVID policy and announced the reopening of its borders to international travel. We believe this will lift a major market—and economic—overhang as 2023 begins.

There were bright spots in 2022, including Indonesia’s and India’s markets, both of which were quite resilient given their relatively lower exposure to technology and lack of regulatory pressure. Investors seemed to view both markets as relatively stable havens, which helped deliver more moderate returns—4.23% for Indonesia and -7.49% for India.

Performance Contributors and Detractors:

From a regional perspective, our stock selection in China/Hong Kong was the biggest detractor to performance during 2022 as China’s zero-COVID policy pressured business activity and consumer spending. Our underweight and stock selection in Singapore also detracted from performance. Conversely, the Fund’s overweight to India, as well as stock selection, was the biggest contributor to performance. Our underweight to technology-heavy Taiwan was also a positive contributor.

From a sector perspective, the Fund’s stock selection in communication services detracted the most from performance. Stock selection in health care was also a detractor as was stock selection in consumer discretionary, albeit mitigated by our allocation. On the other hand, the Fund’s underweight to information technology (IT) was a positive contributor, while the Fund’s stock selection in financials was the top contributor to performance as companies in the sector benefited from global interest-rate hikes. By the end of the year, both IT and communication services had experienced a rerating as many economies reopened and post-pandemic recoveries began.

At the holdings level, electronic vehicle (EV) maker XPeng was the biggest detractor as the company faced intensifying competitive pressures in a robustly growing industry. Singapore-based e-commerce platform Sea was another big detractor. It was a casualty of 2022’s technology downturn which especially punished companies without profits, like Sea. Long term, we maintain our conviction in Sea given its already dominant market share in Southeast Asia and its growing share in other emerging markets like Brazil. Conversely, Trip.com and Pinduoduo were among the top performers. Trip.com, a leading online travel agency in China, may be a major beneficiary as China lifts its pandemic restrictions policy. Chinese e-commerce platform Pinduoduo is similarly poised to benefit from China’s reopening. Having cut costs during the pandemic, Pinduoduo is well-positioned to expand margins and improve profitability as consumption rebounds, in our view.

Notable Portfolio Changes:

Over the course of the year, we exited positions including XPeng given the growing headwinds facing the company. We also pared our exposure to Indian and Indonesian banks, such as ICICI Bank, Bajaj Finance, Bank Rakyat Indonesia and Bank Mandiri, where valuations have risen materially. We used this capital to increase our exposure to technology and semiconductor names, including Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics, where valuations became highly compelling amid the broad technology downturn.

The delisting risk to Chinese stocks trading on U.S. exchanges has materially decreased after the U.S. Public Company Accounting Oversight Board (PCAOB) last year gained full access to the audit books of these firms. Accordingly, we shifted some capital from China local shares to Chinese American Depositary Receipts (ADRs) given ADRs can be much more liquid.  

Outlook:

We are constructive on the broad outlook for 2023. As China shelves its zero-COVID policy, we expect consumption to pick up and overall sentiment to improve—though we expect bumps along the road to recovery. For example, normalization will pressure China’s healthcare system as COVID rates rise. 

We also believe the regulatory outlook has improved in China. Following several years of stringent crackdown, we are seeing positive signs the government is signaling its understanding of private companies’ important role—especially technology companies, which create many high-quality jobs, which China needs. Further, China seems to be making headway stabilizing its real estate market.

We are also increasingly seeing signs of a different interest-rate cycle in Asia, especially China. The U.S. faces a tougher inflation fight than China, which could result in lower interest rates and more stimulus in China and lead to some decoupling between the two economies in 2023.

The combination of relatively lower (and therefore, more compelling) valuations, improved investor sentiment and positive economic and regulatory outlooks give us relative optimism about the year ahead. That said, investing is hardly ever without its surprises—and we will remain ready to reposition the portfolio accordingly, should developments warrant.

Top 10 holdings as of December 31, 2022. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MATFX as of 12/31/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-24.80% 6.86% 5.17% 10.72% 4.47% 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 1.09%

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.