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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

-19.94%

YTD Return

(as of 12/01/2022)

$8.04

NAV

(as of 12/01/2022)

+0.23

1 Day NAV Change

(as of 12/01/2022)

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.

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

Fund Facts
Inception Date 11/30/2011
Fund Assets $33.57 million (10/31/2022)
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
Fees & Expenses
Gross Expense Ratio 1.05%
Net Expense Ratio 1.05%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 10/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund - MAINX
11/30/2011
MAINX
-11.59% -13.05% -32.39% -33.03% -11.40% -5.60% -0.97% 0.10%
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
-2.29% -7.26% -15.83% -15.55% -3.71% -0.36% 1.18% 2.07%
As of 09/30/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund - MAINX
11/30/2011
MAINX
-4.25% -5.50% -23.52% -25.53% -7.18% -3.23% 0.47% 1.24%
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
-4.35% -4.40% -13.86% -14.07% -2.68% 0.13% 1.52% 2.30%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews Asia Total Return Bond Fund - MAINX
MAINX
-4.06% 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
-2.80% 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 09/30/2022)

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.

Yield

(as of 09/30/2022)
18.90% Yield to Worst
13.76% 30-Day SEC Yield
13.55% 30-Day SEC Yield (excluding expense waiver)

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

Ratings

  • OVERALL
  • out of 249 funds
  • 3 YEAR
  • out of 249 funds
  • 5 YEAR
  • out of 217 funds
  • 10 YEAR
  • out of 96 funds
  • 1 YEAR
  • 4th
  • 205 out of 256 funds
  • 3 YEAR
  • 3rd
  • 173 out of 235 funds
  • 5 YEAR
  • 3rd
  • 135 out of 213 funds
  • 10 YEAR
  • 2nd
  • 35 out of 101 funds
  • SINCE INCEPTION
  • 2nd
  • 42 out of 84 funds

Ratings agency calculation methodology

Portfolio Managers

Satya  Patel photo
Satya Patel

Lead Manager

Wei  Zhang photo
Wei Zhang

Co-Manager

Portfolio Characteristics

(as of 09/30/2022)
2.5
Modified Duration
30
Number of Positions

Source: BNY Mellon Investment Servicing (US) Inc.

Risk Metrics (3 Yr Return)

(as of 09/30/2022)
-2.44%
Alpha
1.56
Beta
121.43%
Upside Capture
157.22%
Downside Capture
-0.69
Sharpe Ratio
-0.60
Information Ratio
7.50%
Tracking Error
64.44

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Positions

(as of 10/31/2022)
Name Sector Currency % Net Assets
Franshion Brilliant, Ltd., 6.000%, 02/08/2026 Financial Institutions U.S. Dollar 10.5
ESR Group, Ltd., 5.650%, 09/02/2068 Industrial Singapore Dollar 8.9
PB International BV, 7.625%, 12/31/2025 Industrial U.S. Dollar 6.9
Wanda Properties International Co., Ltd., 7.250%, 01/29/2024 Financial Institutions U.S. Dollar 6.6
Standard Chartered PLC, 4.300%, 02/19/2068 Financial Institutions U.S. Dollar 5.9
HDFC Bank, Ltd., 3.700%, 02/25/2069 Financial Institutions U.S. Dollar 5.0
Krung Thai Bank Public Co., Ltd., 4.400%, 03/25/2026 Financial Institutions U.S. Dollar 5.0
HSBC Holdings PLC, 4.000%, 03/09/2026 Financial Institutions U.S. Dollar 4.9
Network i2i, Ltd., 5.650%, 04/15/2068 Industrial U.S. Dollar 4.7
Xero Investments, Ltd., Cnv., 0.000%, 12/02/2025 Industrial U.S. Dollar 4.6
TOTAL 63.0

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 09/30/2022)
  • Sector Allocation
  • Country Allocation
  • Currency Allocation
  • Quality Distribution
  • Asset Type Breakdown
Sector Fund
Other Financial 20.9
Consumer Cyclical 15.3
Banking 14.1
Government Owned, No Guarantee 10.0
Communications 8.0
Basic Industry 5.6
Technology 5.1
Treasury 3.6
Cash and Other Assets, Less Liabilities 17.4

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

By issuer's country of risk Fund
China/Hong Kong 52.9
India 11.6
Indonesia 8.4
Thailand 4.5
New Zealand 2.9
Singapore 2.2
Cash and Other Assets, Less Liabilities 17.4

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 82.8 1.6
China Renminbi 8.1 0.5
Singapore Dollar 5.5 0.2
Indonesian Rupiah 3.7 0.2

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

Quality Distribution Fund
BBB 3.6
BBB- 3.0
BB+ 4.9
BB 22.2
BB- 7.6
B+ 2.1
B 0.7
B- 2.2
CCC+ 1.4
CCC 1.6
CCC- 4.8
Not Rated 28.5
Cash and Other Assets, Less Liabilities 17.4

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 63.8
Convertible Bonds 15.1
Government Bonds 3.6
Cash and Other Assets, Less Liabilities 17.4

Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.

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.

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)
09/27/2022 09/28/2022 $0.01845 $0.00000 $0.00000 $0.01845 0.2% N.A.
08/24/2022 08/25/2022 $0.02336 $0.00000 $0.00000 $0.02336 0.3% N.A.
06/27/2022 06/28/2022 $0.03678 $0.00000 $0.00000 $0.03678 0.4% N.A.
05/23/2022 05/24/2022 $0.03352 $0.00000 $0.00000 $0.03352 0.4% N.A.
04/25/2022 04/26/2022 $0.03616 $0.00000 $0.00000 $0.03616 0.4% N.A.
03/28/2022 03/29/2022 $0.03409 $0.00000 $0.00000 $0.03409 0.4% N.A.
02/22/2022 02/23/2022 $0.03827 $0.00000 $0.00000 $0.03827 0.4% N.A.
01/24/2022 01/25/2022 $0.02001 $0.00000 $0.00000 $0.02001 0.2% N.A.
12/14/2021 12/15/2021 $0.07644 $0.00000 $0.01558 $0.09202 0.9% N.A.
11/17/2021 11/18/2021 $0.04706 $0.00000 $0.00000 $0.04706 0.4% N.A.
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.
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, 2022

For the quarter ending September 30, 2022, the Matthews Asia Total Return Bond Fund returned -5.50% (Investor Class) and -5.47% (Institutional Class), while its benchmark, the 50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index returned -4.40%.

Market Environment:

For Asian corporate bonds, third quarter return was once again primarily driven by China high yield real estate sector. The sector continues to experience high volatility and deterioration in confidence, occasionally punctuated by news of additional policy support. Overall sentiment deteriorated over the quarter with average spread for Asia high yield 197 basis points (1.97%) wider on the quarter. The deterioration in China high yield real estate sector was mainly driven by continued news of liquidity shortages in various industry operators and ratings downgrade of select investment grade issuers. While we have seen macro policies on real estate to continue to ease and contracted sales rebound in September, the recovery is slowed by COVID prevention measures as well as decreased buyer confidence. Continued lack of liquidity for the entire sector pressure yields higher.

On interest rate and currency, the key theme remained inflation. Asia interest rates were broadly higher during the quarter along with U.S. interest rate. While the U.S. Federal Reserve made stronger commitments to rein in inflation, and anchor long-term inflation expectations, it remained elevated in part due to high energy prices, supply disruptions and increased inflation from service sectors. Higher U.S. interest rate and geopolitical uncertainties also provided strength to the U.S. dollar which appreciated against all Asian currencies.

Performance Contributors and Detractors:

During the quarter, return for the corporate bond portion of the portfolio was driven primarily by China high yield real estate sector. The Fund’s China portion of the corporate bonds underperformed the benchmark due to our overweight in China real estate and selection effect. Indonesia outperformed the benchmark on the back of better selection relative to the benchmark. Within the corporate bonds, the top three contributors were Indonesian textile manufacturer PB International, China-based financial leasing company Far East Horizon and China-based real estate developer Sunac China Holdings. On the other hand, the top three negative detractors were Chinese real estate developers that have up until now avoided the majority of sell off in China real estate sector: Sino Ocean, CIFI Holdings Group, and China Jinmao Holdings.

The convertible bond portion of the portfolio was additive to the Fund’s performance. Top three contributors were: Luye Pharma Group, Iqiyi Inc, and Xero Ltd. Luye Pharma is a Chinese pharmaceutical company. Iqiyi is a video content maker and video platform operator in China. Xero Ltd is an Australian accounting software provider. On the other hand, the top detractors were: Weimob Investment Ltd, Sea Ltd, and Meituan. Weimob Investment Ltd is a China based provider of cloud-based commerce and market solutions. Sea Ltd is a company that provides online person computer and mobile digital content and e-commerce. Meituan is a Chinese food delivery platform.

Notable Portfolio Changes:

During the quarter, we reduced our exposure to local currency bonds and exited positions where potential risks no longer justified the expected returns. For example, we decreased our holdings in China Development Bank and exited Malaysia Government bond to reduce local currency exposure. We believe the recent uncertainties around inflation and geopolitical risk will continue to support a strong U.S. dollar view. We also exited the convertible bond of ESR Group, an Asia focused real estate company, as the bond potential expected return diminished.

On the flip side, we added to contingent convertible bond positions of banks outside of China including Krung Thai Bank, a state-owned commercial bank with main operations in Thailand and HSBC Holdings, a global financial holding company that offers wide range of financial services. We believe these offers attractive yield with low interest rate duration exposure.

The portfolio currently is underweight in both currency exposure and duration in most Asian local currencies.

Outlook:

Looking ahead, with more targeted supportive policies rolled out for the Chinese real estate sector, we expect situation on-the-ground in China to gradually improve. While the entire real estate sector is experiencing difficulty in accessing new funding, we recognize the significance of the sector relative to the Chinese overall economy. Moreover, the sector will continue to rely heavily on non-state owned operators to fulfill future demand. As such, we believe the current market price is overly pessimistic on the future of the sector. China COVID prevention measures is another important piece of the puzzle. We have seen prevention measures gradually decreased which should argue for a more conducive environment to restart normal economic activity and ease supply chain bottlenecks.

With the U.S. Fed still on a rate hike path and with sustained high energy prices, we do not believe the next few quarters to be favorable to Asian local currencies. With inflation rising in most Asian economies, we expect to see most Asian central banks continue to raise interest rate in response.

View the Fund’s top 10 holdings as of September 30, 2022. Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MAINX as of 09/30/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-25.53% -7.18% -3.23% 0.47% 1.24% 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 1.05%
Net Expense Ratio 1.05%

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 09/30/2022
Yield to Worst 18.90%
30-Day SEC Yield 13.76%
30-Day SEC Yield (excluding expense waiver) 13.55%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 09/30/2022, 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.

 

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.