11/30/2011
Inception Date
-0.74%
YTD Return
(as of 09/17/2021)
$10.90
Price
(as of 09/17/2021)
$132.47 million
Fund Assets
(as of 08/31/2021)
Seeks total return over the long term with an emphasis on income.
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.
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.
The risks associated with investing in the Fund can be found in the prospectus.
| Inception Date | 11/30/2011 | |
| Fund Assets | $132.47 million (08/31/2021) | |
| Currency | USD | |
| Ticker | MAINX | |
| Cusip | 577-125-503 | |
| Portfolio Turnover | 39.7% | |
| Benchmark | 50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index | |
| Geographic Focus | Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region | |
| Gross Expense Ratio | 1.15% | |
| Net Expense Ratio | 1.12% | |
Source: BNY Mellon Investment Servicing (US) Inc., Index data from HSBC, iBoxx (Markit). All performance is in US$.
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.
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.
30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.
(as of 06/30/2021)
CATEGORY: Emerging Markets Bond
(as of 06/30/2021)
CATEGORY: Emerging Mrkts Hard Currency Debt Funds
Ratings agency calculation methodology
Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.
The Overall Morningstar® Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and (if applicable) ten-year ratings.
Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
Lipper Analytical Services, Inc., rankings are based on total return, including reinvestment of dividends and capital gains for the stated periods. Funds are assigned a rank within a universe of funds similar in investment objective as determined by Lipper. For the absolute rankings shown the lower the number rank, the better the Fund performed compared to other funds in the classification group. Lipper also calculates a quartile ranking which divides the peer group into quartiles to identify funds of similar quality. Funds in the 1st or 2nd quartile had outperformed the average fund in the peer group while funds in the 3rd or 4th quartile had underperformed.
Lead Manager
Portfolio Manager
Teresa Kong is a Portfolio Manager at Matthews Asia and manages the firm’s Asia Total Return Bond and Asia Credit Opportunities Strategies. Prior to joining Matthews Asia in 2010, she was Head of Emerging Market Investments at Barclays Global Investors, now known as BlackRock, and responsible for managing the firm’s investment strategies in Emerging Asia, Eastern Europe, Africa and Latin America. She developed and managed strategies spanning absolute return, active long-only and exchange-traded funds. In addition to founding the Fixed Income Emerging Markets Group at BlackRock, she was also Senior Portfolio Manager and Credit Strategist on the Fixed Income credit team. Previously, Teresa was a Senior Securities Analyst in the High Yield Group with Oppenheimer Funds, and began her career with J.P. Morgan Securities Inc., where she worked in the Structured Products Group and Latin America Capital Markets Group. She received both a B.A. in Economics and Political Science and an M.A. in International Development Policies from Stanford University. She speaks Cantonese fluently and is conversational in Mandarin.
Co-Manager
Portfolio Manager
Satya Patel is a Portfolio Manager at Matthews Asia and manages the firm's Asia Credit Opportunities Strategy and co-manages the Asia Total Return Bond and Asian Growth and Income Strategies. Prior to joining Matthews Asia in 2011, Satya was an Investment Analyst with Concerto Asset Management. He earned his MBA from the University of Chicago Booth School of Business in 2010. In 2009, Satya worked as an Investment Associate in Private Placements for Metlife Investments and from 2006 to 2008, he was an Associate in Credit Hedge Fund Sales for Deutsche Bank in London. He holds a Master's in Accounting and Finance from the London School of Economics and a B.A. in Business Administration and Public Health from the University of Georgia. Satya is proficient in Gujarati.
Co-Manager
Portfolio Manager
Wei Zhang is a Portfolio Manager at Matthews Asia and co-manages the Asia Total Return Bond Strategy. Prior to joining the firm in 2015, he earned an MBA from Columbia University. From 2008 to 2012, Wei worked as an analyst at Bluecrest Capital Management, evaluating fundamental investments in equity and credit, with a focus on industrials, basic materials and energy sector opportunities. From 2007 to 2008, he was also an analyst with GF Capital Management, where he performed in-depth fundamental research, built and maintained financial models and participated in acquisition contact negotiations. He started his career as an analyst at Sowood Capital Management in 2006. Wei received a B.S. in Finance and International Business from the Leonard N. Stern School of Business at New York University. He is fluent in Mandarin.
Source: BNY Mellon Investment Servicing (US) Inc.
Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.
"Foreign Government Bonds" category includes supranationals.
Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.
Sector data (excluding Government Bonds) 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. 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).
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.
Visit our Glossary of Terms page for definitions and additional information.
The Markit iBoxx Asian Local Bond Index tracks the total return performance of a bond portfolio consisting of local-currency denominated, high quality and liquid bonds in Asia ex-Japan. The Markit iBoxx Asian Local Bond Index includes bonds from the following countries: China (on- and offshore markets), Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.
The J.P. Morgan Asia Credit Index (JACI) tracks the total return performance of the Asia fixed-rate dollar bond market. JACI is a market cap-weighted index comprising sovereign, quasi-sovereign and corporate bonds and is partitioned by country, sector and credit rating. JACI includes bonds from the following countries: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand.
The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Index is a free float-adjusted market capitalization-weighted index of Chinese equities that includes H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges, Hong Kong-listed securities known as Red chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China) and foreign listings (e.g. ADRs).
The MSCI China All Shares Index captures large and mid-cap representation across China A shares, B shares, H shares, Red chips (issued by entities owned by national or local governments in China), P chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g. ADRs). The index aims to reflect the opportunity set of China share classes listed in Hong Kong,Shanghai, Shenzhen and outside of China.
The MSCI Emerging Markets (EM) Asia Index is a free float-adjusted market capitalization weighted index of the stock markets of China, India, Indonesia, Malaysia, Pakistan, Philippines, South Korea, Taiwan and Thailand. The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Small Cap Index is a free float-adjusted market capitalization weighted small cap index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungry, India, Indonesia, Kuwait, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan Thailand, Turkey and United Arab Emirates.
The S&P Bombay Stock Exchange 100 (S&P BSE 100) Index is a free float–adjusted market capitalization–weighted index of 100 stocks listed on the Bombay Stock Exchange.
The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.
The Korea Composite Stock Price Index (KOSPI) is a market capitalization–weighted index of all common stocks listed on the Korea Stock Exchange.
The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Small Cap Index is a free float-adjusted market capitalization-weighted small cap index of the Chinese equity securities markets, including H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges,Hong Kong-listed securities known as Red Chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g., ADRs).
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.
Commentary
Period ended June 30, 2021
For the first half of 2021, the Matthews Asia Total Return Bond Fund returned -1.63% (Investor Class) and -1.56% (Institutional Class) while its benchmark, the 50% Markit iBoxx Asian Local Bond Index/50% J.P. Morgan Asia Credit Index (JACI), returned -1.61%. For the quarter ending June 30, the Fund returned 1.09% (Investor Class) and 1.14% (Institutional Class) compared to the benchmark return of 1.36%.
Market Discussion:
Unlike many other market cycles, this cycle was uniquely quick in its ups and downs, probably as it was driven by an unprecedented pandemic. With barely a year since COVID-19 lockdowns and recession, the global economy is showing signs of a full expansion. Global purchasing managers index (PMI) hit 55.5 in June—an indication of growth or expansion within the manufacturing and services sectors of the economy compared to the prior month. Inflation is rising, with U.S. consumer price index (CPI) hitting 5.0% in May, driven mostly by goods and commodities inflation. Oil prices rose 18% in the second quarter. The rapid lockdowns and re-opening have thus created supply shortages, driving up goods prices.
Expectations of normalization of life drove normalization of markets. The second quarter of the year was a generally good one for bonds and equities. The JP Morgan Asia Credit Index (JACI) returned 1.4% on the quarter, while MSCI Emerging Markets returned 5.2%. Asian currencies appreciated slightly, returning 0.4% as measured by the Asian trade-weighted currency basket.
In light of these data points, the Fed decided to signal a downshift of its easing stance at the June Federal Open Market Committee. In its own words, it is “talking about talking about tapering”—probably the most dovish language to describe a move towards tightening stance. As the market digested this “dovish hawkish” news, 10-year U.S. Treasuries declined in the quarter—starting the quarter at 1.74% and ending it at 1.47%.
Performance Contributors and Detractors:
For the first two quarters of 2021, our short duration stance and local currency underweight relative to the benchmark generally contributed to performance, led by our positions in Singapore and Thailand. On the other hand, our underweight to investment grade credit detracted from performance. Within, U.S. dollar-denominated corporate exposures, Chinese real estate developers and internet platforms such as South Korea’s KaKao Corp., contributed to performance. Exposure to Pan Brothers, an Indonesian textile manufacturer, and China’s Huarong Finance detracted from performance.
In general, the Fund’s local currency positions performed in line with the benchmark during the second quarter. Exposure to Indonesia and Malaysian local bonds contributed to performance while exposures to Singapore and South Korea detracted during the same period. The portfolio’s currency performance was neutral—our position in the Thai baht contributed positively while our position in the Singapore dollar detracted.
The U.S. dollar-denominated holdings performed positively relative to the benchmark. Within our U.S. dollar-denominated investments, the largest contributors to performance came from the convertible bonds of Kakao Corp., a South Korean online messaging and e-commerce platform, and high yield bonds of basic industry companies. On the other hand, the biggest detractor came from Huarong Finance. We initiated a position in Huarong, a Chinese asset manager, after its bonds sold off on news of possible losses from non-core overseas investments and the delay of its annual results. We believe the bonds were oversold given the data vacuum regarding the extent of the losses. In our base case, Huarong will likely experience some combination of asset sales and government support such that bondholders be made whole over the next few quarters.
Notable Portfolio Changes:
In terms of currency, we sold the portfolio’s Indian rupee exposure and added Korean won exposure in the quarter. We expect inflation and rising commodity prices to disproportionately hurt India. We added the Korean won to take advantage of the cyclical global recovery as the country is heavily tied to the global semiconductor and trade cycle.
We also added exposure to Chinese real estate and internet sectors. Within real estate, we added CIFI Holdings, a high-quality developer that we previously held. Within Chinese internet, we initiated convertible bond positions in Meituan, a web-based shopping platform company, and Weimob, an e-commerce and marketing solutions company. We believe regulatory risks and competition within the internet space have put price pressure on these names; however, in the long term, we believe their businesses will scale to drive profitability. We also added embattled Huarong Finance for the special situations opportunity as the company works through asset sales and/or a corporate restructuring.
We exited Krungthai Bank bonds given its unfavorably upside vs. downside skew with new waves of COVID resurgence in Thailand pushing out expectations of an economic rebound. We also exited Philippines government bonds as the bonds had done well and hit our price targets.
Outlook:
The Fed is taking an extremely patient stance considering that we are in the full expansion part of the cycle, which typically calls for tightening of monetary policy to counteract its excesses. Given that signs point towards re-starting of economic activity around the world, we expect the Fed to be on a more hawkish path going forward, but that its tightening will generally lag the expansionary trend of the economy. Therefore, the U.S. economy will have room to grow and we believe asset prices can do well in this environment. We do anticipate U.S. Treasuries to go up from here, with fair value around the 2% – 2.5% range given current economic conditions.
In Asia, we expect to see relatively muted movements in interest rates for most countries. With the Fed potentially tapering, it may put pressure on Asian central banks to consider whether their policy is overly accommodative. Developed Asian rates will probably follow Treasuries higher, but also lag in terms of the pace of rise.
In terms of currency, we do not see a clear trend yet. Global expansion and rising commodity prices should mean a weaker U.S. dollar and stronger high volatility Asia currencies. However, as our base case is for Asia government yields to lag those of U.S., lower carry of Asia currencies might counteract what might otherwise be a weaker U.S. dollar. While a general recovery in risk sentiment helps all Asian currencies, we are mindful of idiosyncratic risks between each country with regards to the speed of each country’s recovery from COVID, ability to manage ongoing virus spread, as well as country-specific macro fundamentals.
As of June 30, 2021, the securities mentioned comprised the Matthews Asia Total Return Bonds Fund in the following percentages: PB International BV, 7.625%, 01/26/2022, 1.2% Kakao Corp., Cnv., 0.000%, 04/28/2023, 1.0%; Huarong Finance 2017 Co., Ltd., 4.000%, 05/07/2068, 1.1%; Huarong Finance 2019 Co., Ltd., 4.250%, 03/30/2068, 1.0%; Huarong Finance 2017 Co., Ltd., 4.500%, 07/24/2068, 0.5%; CIFI Holdings Group Co., Ltd., 4.800%, 05/17/2028, 2.5%; Meituan, Cnv., 0.000%, 04/27/2028, 0.5%; Weimob Investment, Ltd., Cnv., 0.000%, 06/07/2026, 0.8%.
The Fund held no positions in Krungthai Bank. Current and future portfolio holdings are subject to change and risk.
Average Annual Total Returns - MAINX as of 06/30/2021
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
Matthews has contractually agreed to waive fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2022. Please see the Fund’s prospectus for additional details.
Yields as of 06/30/2021
The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 06/30/2021, 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 is the lowest potential yield a bond can receive without actually defaulting – is for the underlying bond-only portion of the portfolio, and as of May 2020, 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. It 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.