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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

-1.57%

YTD Return

(as of 04/14/2021)

$26.28

Price

(as of 04/14/2021)

$2.08 billion

Fund Assets

(as of 03/31/2021)

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.

The risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 12/27/1999
Fund Assets $2.08 billion (03/31/2021)
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 1.19%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 03/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund
MATFX
-7.89% -0.71% -0.71% 102.51% 23.36% 23.76% 14.69% 6.93% 12/27/1999
MSCI All Country Asia ex Japan Index
-2.52% 2.75% 2.75% 57.77% 9.20% 14.12% 6.96% 7.32%
As of 03/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund
MATFX
-7.89% -0.71% -0.71% 102.51% 23.36% 23.76% 14.69% 6.93% 12/27/1999
MSCI All Country Asia ex Japan Index
-2.52% 2.75% 2.75% 57.77% 9.20% 14.12% 6.96% 7.32%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012 2011
Matthews Asia Innovators Fund
MATFX
86.72% 29.60% -18.62% 52.88% -9.10% 4.48% 9.24% 35.61% 14.11% -17.26%
MSCI All Country Asia ex Japan Index
25.36% 18.52% -14.12% 42.08% 5.76% -8.90% 5.11% 3.34% 22.70% -17.07%

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 03/31/2021)

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 56 funds
  • 3 YEAR
  • out of 56 funds
  • 5 YEAR
  • out of 50 funds
  • 10 YEAR
  • out of 29 funds
  • 1 YEAR
  • 1st
  • 2 out of 42 funds
  • 3 YEAR
  • 1st
  • 2 out of 41 funds
  • 5 YEAR
  • 1st
  • 6 out of 35 funds
  • 10 YEAR
  • 1st
  • 1 out of 24 funds
  • SINCE INCEPTION
  • 2nd
  • 7 out of 14 funds

Ratings agency calculation methodology

Portfolio Manager*

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

Lead Manager

*Effective March 2, 2021 Raymond Deng is no longer associated with the Fund.

Portfolio Characteristics

(as of 03/31/2021)
35
Number of Securities

Source: BNY Mellon Investment Servicing (US) Inc.

29.7x
P/E using FY1 estimates
24.4x
P/E using FY2 estimates
$157.7 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 03/31/2021)
Name Sector Country % Net Assets
Bilibili, Inc. Communication Services China/Hong Kong 7.2
Meituan Consumer Discretionary China/Hong Kong 5.4
Sea, Ltd. Communication Services Singapore 5.4
HDFC Bank, Ltd. Financials India 5.2
Wuxi Biologics Cayman, Inc. Health Care China/Hong Kong 4.8
Tencent Holdings, Ltd. Communication Services China/Hong Kong 4.6
JD.com, Inc. Consumer Discretionary China/Hong Kong 4.4
Trip.com Group, Ltd. Consumer Discretionary China/Hong Kong 4.0
TAL Education Group Consumer Discretionary China/Hong Kong 3.9
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 3.8
TOTAL 48.7

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 03/31/2021)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 29.4 18.2 11.2
Communication Services 18.5 11.6 6.9
Financials 14.9 18.3 -3.4
Health Care 12.6 4.7 7.9
Information Technology 7.9 23.5 -15.6
Consumer Staples 7.3 4.8 2.5
Energy 1.9 2.5 -0.6
Real Estate 1.7 4.1 -2.4
Materials 1.5 4.5 -3.0
Industrials 1.4 5.4 -4.0
Utilities 0.0 2.2 -2.2
Cash and Other Assets, Less Liabilities 2.9 0.0 2.9

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 58.7 50.4 8.3
India 14.3 10.9 3.4
South Korea 6.2 15.0 -8.8
Singapore 5.4 2.5 2.9
Taiwan 3.8 15.4 -11.6
France 2.3 0.0 2.3
Thailand 2.2 2.1 0.1
Indonesia 2.0 1.4 0.6
Australia 1.5 0.0 1.5
Vietnam 0.7 0.0 0.7
Malaysia 0.0 1.5 -1.5
Philippines 0.0 0.7 -0.7
Cash and Other Assets, Less Liabilities 2.9 0.0 2.9

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 74.3 64.8 9.5
Large Cap ($10B-$25B) 17.9 19.1 -1.2
Mid Cap ($3B-$10B) 4.1 15.1 -11.0
Small Cap (under $3B) 0.7 1.0 -0.3
Cash and Other Assets, Less Liabilities 2.9 0.0 2.9

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)
12/15/2020 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, 2020

For the year ending December 31, 2020, the Matthews Asia Innovators Fund returned 86.72% (Investor Class) and 87.01% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned 25.36% over the same period. For the fourth quarter of the year, the Fund returned 29.06% (Investor Class) and 29.08% (Institutional Class) versus 18.66% for the Index.

Market Environment:

Equities across Asia were volatile in the year, but broad market indexes tracking the region ultimately generated attractive returns. Global markets fell in the first quarter, as worries surrounding the spread of COVID-19 moved from China throughout Europe to the U.S. and then back to South Asia, including India. Fears of a global growth slowdown turned into reality as governments worldwide began to implement different versions of “shelter in place” to contain the movement of the virus. Early in the year, cyclically sensitive sectors like energy, materials, industrials and financials suffered most while companies related to communication services and technology performed better. In the second quarter, most global financial markets, including Asia’s, began to rise as major economies began to relax prior pandemic-related restrictions. The gradual reopening of businesses—especially those focused on services and consumption— helped bolster sentiment and bring a floor to stock prices globally.

In the third quarter, economic recovery and improved sentiment began to take hold as major economies continued to relax COVID-19 lockdown restrictions even further. China’s V-shaped recovery in manufacturing along with a steady recovery in domestic consumption brought some normalcy to daily life. EM currencies rallied slightly against the U.S. dollar in the third quarter, acting as a slight tailwind for EM equities. Growth stocks outpaced value and small caps outperformed large caps in the third quarter. The fourth quarter saw further economic strengthening. Cyclical stocks in beaten-up or export-driven markets such as Indonesia and South Korea rallied most in the fourth quarter, while markets that experienced early recovery like China, Japan and India lagged slightly. Market strength gained momentum following the U.S. Presidential elections in November as markets hoped for less confrontational U.S. – China relations, combined with an announcement of several approved COVID-19 vaccines that were due for distribution early in 2021.

Performance Contributors and Detractors:

From a regional perspective, stock selection in China/Hong Kong was a contributor in the full year. Innovative companies in China continued to benefit from trends accelerated by the pandemic, generating attractive equity price gains. From a sector perspective, stock selection in communication services was also a contributor. Companies that provide digital platforms, video sharing and even online classifieds, for example, made gains across the region. Among individual securities, Sea Ltd was a contributor. As a Singapore-based gaming and e-commerce company, Sea is one of the few Internet companies focused on serving customers in South and Southeast Asia with significant scale and market share in Singapore, Indonesia and Thailand. On the other hand, the Fund’s underweight to South Korea and Taiwan were slight detractors from relative performance, even though stock selection was positive for both. HDFC Bank Ltd, an Indian financials company, was a slight relative detractor. The financial sector overall took longer to recover than other sectors. Financials were weak in the reporting period, but we continue to like the company’s long-term prospects. As one of India’s oldest private sector banks, HDFC is a high-quality bank primarily serving retail customers.

Notable Portfolio Changes:

During the fourth quarter, we rotated capital and also trimmed some positions that we believe have reached their full intrinsic value and rotated into other nascent opportunities in innovative companies across the region. As part of this rotation, we added a handful of positions in China, as well as South and Southeast Asia, where we found what we believe to be better growth opportunities at attractive valuations.

We initiated a position in e-commerce company JD.com, which experienced increased demand for its services during the pandemic. As the second largest e-commerce company in China, JD.com has a broad reach and its profitability is improving. Logistics-oriented businesses tend to be very capital intensive in their early years, but with much of JD.com’s logistic infrastructure already in place, we expect that the business may be less capital intensive going forward. China has many metropolitan densities and the complexity of making deliveries to most households is high, creating a competitive moat for an e-commerce player such as JD.com. The new position in JD.com serves as a complement to existing Fund holding Alibaba, another giant in China’s e-commerce space. As we continue to monitor potential regulatory risks associated with Alibaba, owning JD.com is a way for us to increase and diversify our China e-commerce exposure. We expect China’s strong economic recovery to continue to boost e-commerce sales in the year ahead.

Outlook:

Looking ahead, uncertainty remains in terms of the pace of Asia’s economic recovery. As we don’t yet know how quickly vaccines can be distributed, we can’t forecast how quickly daily patterns may return to normal. The strength of the economic recovery in different markets where we invest may not be immediately evident. Also, valuations for Asia ex-Japan equities are above their historic averages. In some areas of the market, we believe investors have already priced in a high level of anticipated future growth. All of these emphasize the importance of investing with a long-term view.

At the same time, we see many reasons for optimism. Asia is on a path to economic recovery and the sheer size of the consumer base in Asia works in its favor. Valuations for Asia ex-Japan equities rose in 2020, so there is less valuation support for the broader market, but we continue to see pockets of opportunity. Over time, the market will begin to differentiate between companies that can execute well on their vision, and seize market share in an altered business environment. Innovation remains a key driver of growth in Asia. We continue to look for companies that can build deep, competitive moats by differentiating their products and services through creativity, intellectual property and new ways of meeting consumer demand.

 

As of 12/31/2020, the securities mentioned comprised the Matthews Asia Innovators Fund in the following percentages: Sea, Ltd. ADR, 5.1%; HDFC Bank Ltd., 4.4%; JD.com, Inc. A Shares, 3.0%; Alibaba Group Holding, Ltd., 3.8%. Current and future portfolio holdings are subject to change and risk.

Average Annual Total Returns - MATFX as of 03/31/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
102.51% 23.36% 23.76% 14.69% 6.93% 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 1.19%

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.