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Matthews Japan Fund MJFOX

Snapshot
  • High-conviction growth strategy seeks alpha in Japan
  • Unconstrained all-cap approach seeking Japanese companies positioned to benefit from Asia's growth
  • Invests in companies leveraged to the fast growing consumer demand across Asia, global industry leaders and entrepreneurial companies providing innovative domestic solutions

12/31/1998

Inception Date

-28.97%

YTD Return

(as of 07/01/2022)

$15.69

Price

(as of 07/01/2022)

$1.16 billion

Fund Assets

(as of 05/31/2022)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Japan 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 Japan. 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. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.

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

Fund Facts
Inception Date 12/31/1998
Fund Assets $1.16 billion (05/31/2022)
Currency USD
Ticker MJFOX
Cusip 577-130-800
Portfolio Turnover 70.3%
Benchmark MSCI Japan Index
Geographic Focus Japan
Fees & Expenses
Gross Expense Ratio 0.95%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 05/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Japan Fund
MJFOX
3.26% -9.55% -21.10% -18.18% 4.99% 3.39% 8.78% 5.58% 12/31/1998
MSCI Japan Index
1.65% -7.62% -13.28% -13.01% 5.48% 4.04% 7.33% 3.48%
As of 03/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Japan Fund
MJFOX
-3.89% -16.16% -16.16% -13.10% 6.10% 5.90% 8.58% 5.90% 12/31/1998
MSCI Japan Index
-0.34% -6.45% -6.45% -6.14% 7.22% 6.48% 6.79% 3.84%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews Japan Fund
MJFOX
-1.92% 29.82% 26.08% -20.18% 33.14% 0.40% 20.83% -2.60% 34.03% 8.32%
MSCI Japan Index
2.04% 14.91% 20.07% -12.58% 24.39% 2.73% 9.90% -3.72% 27.35% 8.36%

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 03/31/2022)

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.

Ratings

  • OVERALL
  • out of 34 funds
  • 3 YEAR
  • out of 34 funds
  • 5 YEAR
  • out of 27 funds
  • 10 YEAR
  • out of 21 funds
  • 1 YEAR
  • 3rd
  • 26 out of 34 funds
  • 3 YEAR
  • 2nd
  • 14 out of 33 funds
  • 5 YEAR
  • 3rd
  • 16 out of 26 funds
  • 10 YEAR
  • 2nd
  • 8 out of 20 funds
  • SINCE INCEPTION
  • 2nd
  • 3 out of 7 funds

Ratings agency calculation methodology

Portfolio Managers

Taizo  Ishida photo
Taizo Ishida

Lead Manager

Shuntaro  Takeuchi photo
Shuntaro Takeuchi

Lead Manager

Portfolio Characteristics

(as of 03/31/2022)
Fund Benchmark
Number of Positions 53 260
Weighted Average Market Cap $39.4 billion $53.4 billion
Active Share 68.8 n.a.
P/E using FY1 estimates 17.8x 13.2x
P/E using FY2 estimates 16.8x 12.9x
Price/Cash Flow 12.4 10.7
Price/Book 2.0 1.4
Return On Equity 12.5 11.2
EPS Growth (3 Yr) 10.4% -4.2%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 03/31/2022)
-0.24%
Alpha
0.90
Beta
96.38%
Upside Capture
102.38%
Downside Capture
0.36
Sharpe Ratio
-0.14
Information Ratio
7.92%
Tracking Error
72.59

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 05/31/2022)
Name Sector % Net Assets
Sony Group Corp. Consumer Discretionary 4.6
Shin-Etsu Chemical Co., Ltd. Materials 4.6
ORIX Corp. Financials 3.7
Olympus Corp. Health Care 3.6
JSR Corp. Materials 3.3
Daiichi Sankyo Co., Ltd. Health Care 3.2
Tokyo Electron, Ltd. Information Technology 3.1
Renesas Electronics Corp. Information Technology 3.0
SMC Corp. Industrials 2.9
Keyence Corp. Information Technology 2.8
TOTAL 34.8

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 03/31/2022)
  • Sector Allocation
  • Market Cap Exposure

Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.

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 $0.23596 $0.32236 $2.18705 $2.74537 11.1% 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 March 31, 2022

For the first quarter of the year, the Fund returned -16.16% (Investor Class) and -16.13% (Institutional Class), while its benchmark, the MSCI Japan Index, returned -6.45% over the same period.

Market Environment: 

The first quarter saw two significant trends in Japanese equity markets. Japanese stocks performed better than their international peers, excluding U.S. markets, despite the yen weakening to the lowest level since 2015. Ongoing improvements in Japan corporates’ margin capabilities and reasonable valuation levels contributed to this performance. At the same time, Japanese markets experienced a historic quarter for value style investing that was induced by the sharp repricing of bond yields. The month of January saw the largest spread between growth performance and value performance in 30 years.  

Performance Contributors and Detractors:

Overall, the first three months of the year were not dissimilar to the first three months of 2021 as our focus on high-quality growth struggled amid a surge in U.S. 10-year bond yields. From a sector perspective, allocations in our key overweight sectors—information technology, health care and industrials—were the largest detractors to the relative performance of the portfolio. Industrials was notably impacted due to its inclusion of commodity price-sensitive trading companies and cyclical-transport enterprises—businesses that have been challenged by surging fuel prices and supply-chain disruption. On the other hand, our overweight and stock selection in consumer staples was the largest contributor to relative performance.

From a market cap point of view, our overweight in small cap stocks—those under $3 billion—was also a detractor to performance. Our underweight in mega cap and mid cap stocks was also a large detractor.

Turning to individual securities, technology conglomerate Sony Group Corp. was the largest detractor to Fund performance. Soon after the stock approached near all-time high prices on the second trading day of 2022 it faced profit-taking selling pressure even after reporting strong third-quarter results. Like Sony, Recruit Holdings Co., a leading HR and media marketing-solution provider, was one of the portfolio’s top contributors last year. But in the first quarter of 2022, Recruit was the second-largest detractor. Its HR Tech segment, comprising indeed.com and Glassdoor, has reported record high margins with over 40% in topline growth and so it will face tough year-over-year sales comparisons in the next fiscal year.  

On the positive side, Seven & i Holdings Co., the operator of 7-Eleven stores in Japan and the U.S., was the largest contributor to performance. We believe the company’s U.S. operation (7-Eleven Inc. and Speedway, the gas-station/convenience-store chain) will continue to benefit from high fuel prices, as well as from the group’s ability to achieve synergies and pass-through costs. Longer term, there’s also potential for improved corporate governance. Trading giant Mitsubishi Corp. was the second-largest contributor. The company continues to benefit from high commodity prices and a weaker yen. Additionally, we think Mitsubishi will improve its focus on total shareholder return along with its investments for renewable energy.

Notable Portfolio Changes:

One significant adjustment within our portfolio is the increase in defensive sectors such as consumer staples. While we still see economic growth recovery as the world reopens from the pandemic, ongoing uncertainty over the war in Ukraine, coupled with inflation risks and a rising interest-rate environment, warrant a more balanced approach towards growth in our view.

In the first quarter, we initiated a position in NTT Data Corp., an IT service company that is benefiting from domestic government demand for digital transformation projects and restructuring efforts bearing fruit in its overseas business. We took advantage of recent market weakness which sent the shares down to lower valuation levels.

We also initiated a position in IHI Corp. We believe the heavy machinery company will benefit from an aircraft-parts recovery as economic activity reopens. We also think the company’s liquified natural gas (LNG) boilers and nuclear facility after-service businesses will gain from high energy prices.

In order to make positions for new names we exited Advantest Corp., Eisai Co., Ibiden Co., JMDC Inc., Kakaku.com Inc., Mitsui High-tec Inc., Net Protections Holdings Inc., Nintendo Co., OBIC Business Consultants Co., Sansan Inc. and Sysmex Corp.

Outlook:

2022, just like 2021, is off to a tough start for high-quality growth strategies. The velocity of the widening of growth-value spreads has made it challenging to adapt our strategy quickly. But while extremely loose monetary policy from all major central banks has come to an end and the Federal Reserve has officially started to tighten, we believe that the long-value/short-growth trade has now fully unwound back to pre-pandemic levels. And during the first quarter, growth companies continued to improve their margins and strengthen their cashflow generation abilities.

So, while we are taking a more balanced approach towards multiple stages of growth and valuation levels, we believe the earnings capability of Japanese companies has improved meaningfully over the past economic cycle, helped by productivity improvements, better corporate governance, innovation and a higher focus on capital efficiency.

For many years, Japanese equities have not been considered a place to invest but rather a place to trade in and out of. However, the dynamic has meaningfully changed since 2010 as Japanese corporates have been generating improving levels of profits in each bottom of the cycle. 2020 showed another resiliency of Japanese corporate profits. We believe Japanese equity market fundamentals have turned from pure value to cyclical growth. While many global investors are skeptical of this change, we believe that is where the investment opportunity lies.

View the Fund’s Top 10 holdings as of March 31, 2022. Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MJFOX as of 03/31/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-13.10% 6.10% 5.90% 8.58% 5.90% 12/31/1998

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 0.95%

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. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.

 

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.