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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

-24.02%

YTD Return

(as of 08/09/2022)

$7.67

NAV

(as of 08/09/2022)

-0.01

1 Day NAV Change

(as of 08/09/2022)

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 $64.06 million (07/31/2022)
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 07/31/2022
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
-3.92% -12.73% -22.24% -22.91% -6.68% -2.65% 0.90% 1.42%
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
0.73% -1.99% -9.24% -10.23% -0.79% 1.29% 2.25% 2.84%
As of 06/30/2022
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
-6.32% -10.29% -19.07% -21.15% -5.20% -1.71% 1.56% 1.82%
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
-2.54% -5.70% -9.90% -10.99% -0.79% 1.32% 2.42% 2.80%
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 06/30/2022)

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 06/30/2022)
13.63% Yield to Worst
10.44% 30-Day SEC Yield
10.34% 30-Day SEC Yield (excluding expense waiver)

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

Ratings

  • OVERALL
  • out of 253 funds
  • 3 YEAR
  • out of 253 funds
  • 5 YEAR
  • out of 215 funds
  • 10 YEAR
  • out of 89 funds
  • 1 YEAR
  • 3rd
  • 174 out of 260 funds
  • 3 YEAR
  • 3rd
  • 150 out of 239 funds
  • 5 YEAR
  • 3rd
  • 131 out of 212 funds
  • 10 YEAR
  • 2nd
  • 37 out of 94 funds
  • SINCE INCEPTION
  • 2nd
  • 41 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 06/30/2022)
3.1
Modified Duration
38
Number of Positions

Source: BNY Mellon Investment Servicing (US) Inc.

Risk Metrics (3 Yr Return)

(as of 06/30/2022)
-3.01%
Alpha
1.80
Beta
144.35%
Upside Capture
184.27%
Downside Capture
-0.54
Sharpe Ratio
-0.65
Information Ratio
6.74%
Tracking Error
75.72

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Positions

(as of 07/31/2022)
Name Sector Currency % Net Assets
China Development Bank, 3.800%, 01/25/2036 Agency China Renminbi 7.4
Franshion Brilliant, Ltd., 6.000%, 02/08/2026 Financial Institutions U.S. Dollar 6.1
Wanda Properties International Co., Ltd., 7.250%, 01/29/2024 Financial Institutions U.S. Dollar 5.3
Periama Holdings LLC, 5.950%, 04/19/2026 Industrial U.S. Dollar 5.2
ESR Group, Ltd., 5.650%, 09/02/2068 Industrial Singapore Dollar 4.9
PB International BV, 7.625%, 12/31/2025 Industrial U.S. Dollar 4.1
Standard Chartered PLC, 4.300%, 02/19/2068 Financial Institutions U.S. Dollar 3.6
ESR Group, Ltd., Cnv., 1.500%, 09/30/2025 Industrial U.S. Dollar 3.5
Malaysia Government Bond, 4.642%, 11/07/2033 Treasury Malaysian Ringgit 3.3
Indonesia Government Bond, 8.250%, 05/15/2029 Treasury Indonesian Rupiah 3.3
TOTAL 46.7

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 06/30/2022)
  • Sector Allocation
  • Country Allocation
  • Currency Allocation
  • Quality Distribution
  • Asset Type Breakdown
Sector Fund
Other Financial 19.3
Consumer Cyclical 16.8
Government Owned, No Guarantee 15.5
Basic Industry 8.7
Treasury 7.3
Communications 6.0
Banking 5.8
Consumer Non-Cyclical 4.7
Technology 4.7
Cash and Other Assets, Less Liabilities 11.1

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 60.2
Indonesia 10.7
India 8.4
Malaysia 4.0
New Zealand 2.1
Singapore 1.8
Thailand 1.1
Taiwan 0.7
Cash and Other Assets, Less Liabilities 11.1

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 72.6 1.4
China Renminbi 8.0 1.0
Singapore Dollar 6.9 0.2
South Korean Won 5.0 0.0
Malaysian Ringgit 4.0 0.3
Indonesian Rupiah 3.4 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
A- 4.0
BBB 3.4
BBB- 1.8
BB+ 5.8
BB 20.8
BB- 7.0
B 1.6
B- 2.3
CCC 1.4
C 3.0
Not Rated 38.0
Cash and Other Assets, Less Liabilities 11.1

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 59.7
Convertible Bonds 21.9
Government Bonds 7.3
Cash and Other Assets, Less Liabilities 11.1

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)
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 June 30, 2022

For the first half of 2022, the Matthews Asia Total Return Bond Fund returned -19.07% (Investor Class) and -19.06% (Institutional Class), while its benchmark, the 50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index, returned -9.90% over the same period. For the quarter ending June 30, 2022, the Fund returned -10.29% (Investor Class) and -10.25% (Institutional Class), while the benchmark returned -5.70%.

Market Environment:

The first half of the year was a challenging one for risk assets globally, and Asia fixed income was no exception. For Asian corporate bonds, the half of the year was primarily driven by the China high yield real estate sector. The resurgence of COVID-19 in April and May severely limited economic activity in China and the real estate sector saw a significant decline in sales. As COVID quarantine measures were gradually lifted in June, real estate sales recovered from the trough in April although it is relatively early to say if the recovery trend in June can be sustained in the second half of the year. Asian high yield bond performance has been volatile in recent months. Sentiment deteriorated gradually over the quarter with the average spread for Asia high yield 148 basis points (1.48%) wider on the quarter, driven mostly by changes in the China high yield real estate sector. The deterioration in the China high yield real estate sector is mainly driven by continued defaults of high yield issuers and ratings downgrade of select investment grade issuers. While we have seen macro policies on real estate continue to ease and contracted sales trough in April, the recovery has been slowed by COVID outbreaks in key major cities such as Shanghai and Beijing. We have also seen a lack of demand as buyers struggle to build confidence in the ability of many private developers to complete construction projects. The refinancing ability of issuers in the real estate sector dominate the market’s list of worries and continues to weigh on sentiment.

On interest rate and currency, the key theme has been inflation. Asia interest rates were broadly higher during the quarter along with U.S. interest rates. During the second quarter, inflation expectations were further exacerbated by high energy prices. Supply disruptions due to COVID quarantines in China also contributed to the inflationary pressure during the quarter. The latest development has 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 all Asian currencies.

Performance Contributors and Detractors:

For the first half of the year, the return for the corporate bond portion of the portfolio was driven primarily by the China high yield real estate sector. The Fund’s China portion of corporate bonds underperformed our benchmark due to overweight in China real estate and selection effect. South Korea, Thailand and Indonesia outperformed the benchmark on the back of both selection and underweight relative to the benchmark. For the first half of the year, the top two contributors in corporate bonds were China-based financial leasing company Far East Horizon and International Container Terminal Services, which develops, manages and operates container ports and terminals in Asia. For the first half of the year, the top three negative contributors were Times China Holding, Powerlong Real Estate Holdings, and KWG Group Holding. All three are China real estate developers impacted by the overall China real estate tight funding conditions.

For the first half of the year, the convertible bond portion of the portfolio was a slight detractor to performance. Among individual contributors were Baozun Inc., a Chinese online e-commerce platform primarily serving oversea clients; iQIYI Inc., a video content maker and video platform operator in China; and Luye Pharma Group, a China-based pharmaceutical company focused on orthopedics, neurology, and gastroenterology. Among negative contributors were: Kakao Corp., a South Korean operator of cross platform mobile messaging application; Nio Inc., a Chinese electric vehicle manufacturer; and Weimob Inc., a China based e-commerce solutions provider to small and medium business in China.

Notable Portfolio Changes:

During the second quarter, we exited positions that have reached our price targets or potential risks were no longer justified by the expected returns, including Kakao Corp., the dominant South Korean internet messaging company. We also exited Baozun Inc. as the bond reached its put date and we were able to put the bond back to the issuer.

We also adjusted the portfolio’s currency exposure to be more overweight U.S. dollar and underweight local currencies, including exiting local currency Thailand Government Bond. We believe the recent uncertainties around inflation and geopolitical risk will continue to support a strong U.S. dollar view.

Lastly, we added to convertible bond positions outside of China, including Australian accounting software company Xero Investments and Singapore based Sea Ltd., a provider of online and mobile digital content, e-commerce, and payment platforms.

Outlook:

With COVID-19 brought under control and China exiting some of its strict quarantine measures, economic activity has started to see a significant rebound during the second half of the quarter. Additional macro policy easing has continued to be rolled out. We expect the economic recovery in China to continue in the second half of the year, but a key risk would be a renewed surge in COVID-19 cases which could prompt strict lockdown measures again, severely limiting economic activity.

In the U.S., the Fed responded to the persistent high inflation with a 75 basis points (0.75%) rate hike in June. The discussion is starting to shift from containing inflation to potential policy induced recession. While supply chain disruptions are normalizing, inflation remains stubbornly high. While the Fed has expressed some confidence in bring down inflation without causing a recession, the market remains very much concerned about a recession scenario. The Fed would have a very thin margin of error in achieving the “soft landing” scenario.

With the U.S. Fed still on a rate hike path and high energy prices, we do not believe the next few quarters to be favorable to Asian local currencies and have taken additional steps to reduce the portfolio’s local currency exposure. With inflation rising in most Asian economies, we also expect most Asian central banks to raise interest rates in response. We have also adjusted the portfolio to be underweight in Asia local currency bonds.

 

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

 

Average Annual Total Returns - MAINX as of 06/30/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-21.15% -5.20% -1.71% 1.56% 1.82% 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 06/30/2022
Yield to Worst 13.63%
30-Day SEC Yield 10.44%
30-Day SEC Yield (excluding expense waiver) 10.34%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 06/30/2022, 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.