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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

-1.76%

YTD Return

(as of 10/26/2021)

$26.23

Price

(as of 10/26/2021)

$1.72 billion

Fund Assets

(as of 09/30/2021)

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 $1.72 billion (09/30/2021)
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 09/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund
MATFX
-3.90% -11.20% -6.74% 20.36% 26.51% 20.30% 16.50% 6.46% 12/27/1999
MSCI All Country Asia ex Japan Index
-4.15% -9.23% -3.32% 14.73% 9.50% 10.44% 8.80% 6.84%
As of 09/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund
MATFX
-3.90% -11.20% -6.74% 20.36% 26.51% 20.30% 16.50% 6.46% 12/27/1999
MSCI All Country Asia ex Japan Index
-4.15% -9.23% -3.32% 14.73% 9.50% 10.44% 8.80% 6.84%
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 09/30/2021)

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 46 funds
  • 10 YEAR
  • out of 33 funds
  • 1 YEAR
  • 2nd
  • 10 out of 34 funds
  • 3 YEAR
  • 1st
  • 2 out of 34 funds
  • 5 YEAR
  • 1st
  • 4 out of 28 funds
  • 10 YEAR
  • 1st
  • 1 out of 20 funds
  • SINCE INCEPTION
  • 3rd
  • 7 out of 11 funds

Ratings agency calculation methodology

Portfolio Manager

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

Lead Manager

Portfolio Characteristics

(as of 09/30/2021)
Fund Benchmark
Number of Positions 41 1,210
Weighted Average Market Cap $122.6 billion $146.4 billion
Active Share 81.7 n.a.
P/E using FY1 estimates 30.1x 13.7x
P/E using FY2 estimates 27.0x 12.8x
Price/Cash Flow 29.6 9.6
Price/Book 5.6 1.9
Return On Equity 3.7 13.2
EPS Growth (3 Yr) 17.0% -2.8%

Sources: BNY Mellon Investment Servicing (US) Inc., Factset Research Systems, Inc., Zephyr StyleADVISOR, Matthews Asia

Top 10 Holdings

(as of 09/30/2021)
Name Sector Country % Net Assets
Sea, Ltd. Communication Services Singapore 6.7
Meituan Consumer Discretionary China/Hong Kong 6.0
Bilibili, Inc. Communication Services China/Hong Kong 5.2
Silergy Corp. Information Technology China/Hong Kong 5.0
Tencent Holdings, Ltd. Communication Services China/Hong Kong 4.9
Wuxi Biologics Cayman, Inc. Health Care China/Hong Kong 4.8
Bajaj Finance, Ltd. Financials India 4.4
ICICI Bank, Ltd. Financials India 4.4
HDFC Bank, Ltd. Financials India 4.0
JD.com, Inc. Consumer Discretionary China/Hong Kong 3.0
TOTAL 48.4

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 09/30/2021)
  • 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)
12/15/2020 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 September 30, 2021

For the quarter ending September 30, 2021, the Matthews Asia Innovators Fund returned -11.20% (Investor Class) and -11.10% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -9.23% over the same period.

Market Environment:

The new regulatory policies around China’s Internet sector dominated headlines in Asia as the Chinese government continued to release their guidelines on consumer data protection, workers rights and online gaming restrictions on minors during the quarter. The China Evergrande Group default risk and recent power outage incidents further dented investors’ sentiments during the quarter. While we expect new regulatory policies to create short-term volatilities in the market and disruptions in operating environments in various verticals in China’s Internet industry, we believe that these policies are aimed at improving long-term sustainability of the markets and to foster more innovation in the industry. Most policies that have been announced so far have been targeted at providing fair competition among market participants, protecting workers rights and restricting minors time spent online. These should all benefit healthy development of consumer markets in China and should eventually benefit companies that participate in these industries over the long term. In our view, internet companies continue to be some of the most innovative companies in the region and remain as one of the best positioned industries to benefit from rising disposable income in the region. While we believe that the regulatory environment concerns in China might persist longer, the valuation of Chinese Internet companies currently looks very attractive.

Performance Contributors and Detractors:

On a country basis, India performed the best while China continued to detract from performance during the third quarter. While we expect concerns around Chinese regulatory risks to persist in the near term,  we are seeing some valuation support at current stock price levels as many companies are now trading near their historical lows. India has been the bright spot as the number of COVID-19 cases continued to trend down during the quarter. We continue to see attractive prospects in India, and are encouraged to be seeing more unicorns (private companies valued at or over US$1 billion) coming to the market.

On a company basis, Sea Ltd., a consumer internet company based in Singapore, was the largest contributor to Fund performance during the quarter. Sea continued to execute well within both e-commerce and online gaming, and has been relatively safe from regulatory risks compared with internet companies in China. Bajaj Finance was also a strong contributor to performance as the company has emerged as one of the potential leaders in the fintech industry in India.

Our holdings in China mostly underperformed during the quarter, as concerns over regulatory risks persisted and the latest incidents of power outages also further dampened investor sentiment. Meituan Dianping , China’s largest food delivery service, and Bilibili Inc., one of China’s leading internet entertainment platforms, were among the bottom performers. We continue to hold both companies and added to both positions during the quarter, as the fundamentals of these companies remained healthy and their position as dominant players in their respective fields have strengthened as a result of more regulatory scrutiny.

Notable Portfolio Changes:

During the quarter, we consolidated our positions in China, reducing the total number of holdings while increasing the weightings in higher-conviction names. We sold out of Yatsen Holding Limited, a cosmetics company in China. The cosmetics market in China continues to be very competitive and the growth of Yatsen has been lower than expected. We bought back Chinese agriculture-focused technology platform firm Pinduoduo, as the share price corrected meaningfully during the quarter. Pinduoduo has reported their first profit during the quarter and their user engagement continued to improve strongly. We also added Crompton Greaves, one of the most innovative players in India’s consumer electronics industry in our view and we expect the company to continue to expand their product categories.

Outlook:

The concerns over China’s regulatory environment may cause more volatility in the region. We continue to monitor the situation very closely, making necessary changes as new policies are announced. The valuation of Chinese internet companies look very attractive currently despite these risks and we will continue to build positions in companies that we believe are well positioned to grow and benefit from consumption growth.

Despite difficult challenges in China, we are excited to see significant developments in countries like India, South Korea, Indonesia and other Southeast Asian countries as well. We continue to find many innovative companies in Asia at appealing levels 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 September 30, 2021, the securities mentioned comprised the Matthews Asia Innovators Fund in the following percentages: Sea, Ltd., 6.7%; Bajaj Finance, Ltd., 4.4%; Meituan Dianping, 6.0%; Bilibili, Inc., 5.2%; Pinduoduo, Inc., 1.7%; and Crompton Greaves Consumer Electricals, Ltd., 1.7%. The Fund held no positions in China Evergrande Group and Yatsen Holding Limited.

Current and future portfolio holdings are subject to change and risk.

Average Annual Total Returns - MATFX as of 09/30/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
20.36% 26.51% 20.30% 16.50% 6.46% 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.