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Asia Growth

Matthews Asia Innovators Fund MATFX

Snapshot
  • High-conviction, concentrated equity portfolio of innovative companies in Asia ex Japan
  • 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

-1.59%

YTD Return

(as of 01/14/2022)

$18.56

Price

(as of 01/14/2022)

$1.40 billion

Fund Assets

(as of 12/31/2021)

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 $1.40 billion (12/31/2021)
Currency USD
Ticker MATFX
Cusip 577-130-883
Portfolio Turnover 119.8%
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 1.10%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 12/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund
MATFX
-5.46% -6.82% -13.10% -13.10% 28.12% 21.21% 15.43% 6.04% 12/27/1999
MSCI All Country Asia ex Japan Index
1.41% -1.18% -4.46% -4.46% 12.38% 11.61% 8.32% 6.71%
As of 12/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund
MATFX
-5.46% -6.82% -13.10% -13.10% 28.12% 21.21% 15.43% 6.04% 12/27/1999
MSCI All Country Asia ex Japan Index
1.41% -1.18% -4.46% -4.46% 12.38% 11.61% 8.32% 6.71%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews Asia Innovators Fund
MATFX
-13.10% 86.72% 29.60% -18.62% 52.88% -9.10% 4.48% 9.24% 35.61% 14.11%
MSCI All Country Asia ex Japan Index
-4.46% 25.36% 18.52% -14.12% 42.08% 5.76% -8.90% 5.11% 3.34% 22.70%

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 12/31/2021)

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 52 funds
  • 3 YEAR
  • out of 52 funds
  • 5 YEAR
  • out of 45 funds
  • 10 YEAR
  • out of 32 funds
  • 1 YEAR
  • 4th
  • 29 out of 33 funds
  • 3 YEAR
  • 1st
  • 2 out of 33 funds
  • 5 YEAR
  • 1st
  • 5 out of 27 funds
  • 10 YEAR
  • 1st
  • 1 out of 19 funds
  • SINCE INCEPTION
  • 3rd
  • 7 out of 10 funds

Ratings agency calculation methodology

Portfolio Manager

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

Lead Manager

Portfolio Characteristics

(as of 12/31/2021)
Fund Benchmark
Number of Positions 45 1,213
Weighted Average Market Cap $147.8 billion $147.0 billion
Active Share 72.1 n.a.
P/E using FY1 estimates 23.5x 13.6x
P/E using FY2 estimates 21.1x 13.0x
Price/Cash Flow 16.3 9.7
Price/Book 3.6 1.9
Return On Equity 8.8 13.6
EPS Growth (3 Yr) -28.8% -6.4%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 09/30/2021)
15.31%
Alpha
1.13
Beta
143.39%
Upside Capture
83.59%
Downside Capture
1.08
Sharpe Ratio
1.66
Information Ratio
10.28%
Tracking Error
81.93

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 12/31/2021)
Name Sector Country % Net Assets
ICICI Bank, Ltd. Financials India 5.2
Tencent Holdings, Ltd. Communication Services China/Hong Kong 5.1
Samsung Electronics Co., Ltd. Information Technology South Korea 4.9
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 4.8
HDFC Bank, Ltd. Financials India 4.6
XPeng, Inc. Consumer Discretionary China/Hong Kong 3.6
Meituan Consumer Discretionary China/Hong Kong 3.5
JD.com, Inc. Consumer Discretionary China/Hong Kong 3.4
Silergy Corp. Information Technology China/Hong Kong 3.4
Alibaba Group Holding, Ltd. Consumer Discretionary China/Hong Kong 3.3
TOTAL 41.8

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 12/31/2021)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure

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).

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)
12/14/2021 12/15/2021 $0.00000 $1.10849 $3.22827 $4.33676 18.5% N.A.
12/15/2020 12/16/2020 $0.00000 $0.13545 $0.31069 $0.44614 1.8% 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, 2021

For the year ending December 31, 2021, the Matthews Asia Innovators Fund returned -13.10% (Investor Class) and -12.97% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -4.46% over the same period. For the fourth quarter of the year, the fund returned -6.82% (Investors Class) and -6.84% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -1.18% over the same period.

Market Environment:

2021 was a weak year in Asian markets, led by China as Chinese regulators ramped up regulatory oversight and the cadence of announcements pressured some of the region’s largest and widest held stocks. Regulatory pressure in China was the dominant theme pervading innovative companies in 2021. This in turn created negative sentiment among overseas investors toward innovative stocks in China and triggered volatility and stock selloffs. Innovative companies have also had to navigate supply-chain bottle necks and the Delta and Omicron variant coronavirus surges. They also enter 2022 facing a less growth-conducive macro environment as the Fed and other central banks consider rate rises. These challenges serve as a reminder of the importance of holding a long-term view in Asia and the emerging markets.

Performance Contributors and Detractors:

From a regional perspective, the Fund’s overweight and stock selection in China/Hong Kong detracted the most from performance for the full year as investors sold down holdings amid concerns over China’s regulatory interventions.  The Fund’s underweight to Taiwan also detracted from the Fund’s relative performance, even though stock selection was positive. The technology-dominated Taiwanese market gained as demand for hardware and chips was strong.  On the other hand, the Fund’s overweight and stock selection in Singapore, as well as our exposure to Vietnam contributed to relative performance. From a sector perspective, industrials, materials and consumer discretionary detracted the most from relative performance. Consumer discretionary is our biggest sector allocation—it’s where we believe innovation can flourish and where China’s regulatory moves have also hit hard. While our stock selection was positive, the portfolio’s overweight to the sector detracted from performance. Conversely, stock selection in real estate and financial services sectors were the top contributors. While we remain interested in the real estate sector, we’re mindful that it is now highly regulated and companies in the sector don’t have complete control over their destinies.  

Looking at our holdings, some of our consumer discretionary stocks detracted the most from both absolute and relative performance. In the communications services sector, Bilibili, a Chinese video content company, was one of the biggest detractors. The company’s operational metrics from user acquisition and engagement still trend positively but China’s policies to regulate the health and development of the country’s internet industry continue to put pressure on names in the sector. While we are cautious about the ongoing regulations, we continue to hold Bilibili as the fundamentals of the company remain healthy and its position as one of the dominant players in its field has strengthened as a result of more regulatory scrutiny. On the other hand, Chinese analog chipmaker Silergy was the biggest contributor. While listed in Taiwan, Silergy is a truly global company with an edge in China. The company designs mixed-signal and analog power management integrated circuits that are used in industrial, consumer, computing and communications.

Notable Portfolio Changes:

During the fourth quarter, we consolidated the portfolio’s U.S. American Depository Receipt (ADR) exposure into Hong Kong shares, including XPeng, Inc., an electric vehicle manufacturer, and Bilibili due to increased levels of uncertainty in U.S. – China relations. We also exited our position in China Resources Mixc Lifestyle Services, a property management company. We took part in the company’s IPO but sold our position as soon as the real estate crackdown took hold. Additionally, we took profit from some of our holdings, including Silergy and Sea Ltd, a Singapore-based gaming and e-commerce company and rotated capital into other opportunities in innovative companies across the region. We’ve also been adding to our Alibaba holding as the company is still the dominant ecommerce platform in China and the valuation is very attractive. The stock has also been a good benchmark to gauge investor sentiment toward China.

Outlook:

Looking ahead, concerns over China’s regulatory environment may cause more volatility, and we continue to monitor the situation very closely while also looking for growth opportunities and gauging for changes in sentiment. We believe the valuation of Chinese internet companies look very attractive currently despite these risks. In our view, internet companies continue to be some of the most innovative enterprises in the region and remain among the best positioned industries to benefit from rising disposable income in the region. We will continue to selectively build positions in companies that we believe are well positioned to grow and benefit from consumption. Additionally, China is entering an easing cycle, and we believe there are many companies with good fundamentals and valuations that are poised to benefit from that.

Despite difficult challenges in China, we are excited to see significant developments in countries like India, South Korea and other Southeast Asian countries. We continue to find many innovative companies in Asia at appealing valuations today and the current levels continue to provide fertile hunting ground for companies that are innovating in areas such as business strategy, products and services, marketing and human capital.

 

As of Dec 31, 2021, the securities mentioned comprised the Matthews Asia Innovators Fund in the following percentages: XPeng, Inc., 0.1%; Sea Ltd., 5.8%; Bilibili, Inc., 5.9%; Alibaba Group Holding, 3%; Silergy Corp., 3.3%. The Fund held no positions in: China Resources Mixc Lifestyle Services Ltd.

Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MATFX as of 12/31/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
-13.10% 28.12% 21.21% 15.43% 6.04% 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 1.10%

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.