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Fixed Income

Matthews Asia Total Return Bond Fund MAINX

Snapshot
  • Unconstrained, total return strategy seeking high, risk-adjusted returns through credit, currencies and interest rates
  • Fundamental, bottom-up investment process to generate alpha
  • Designed to comple­ment an emerging market or international fixed income strategy and augment allocation to Asia

11/30/2011

Inception Date

-19.07%

YTD Return

(as of 07/01/2022)

$8.17

Price

(as of 07/01/2022)

$79.95 million

Fund Assets

(as of 05/31/2022)

Objective

Seeks total return over the long term with an emphasis on income.

Strategy

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.

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. 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.

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

Fund Facts
Inception Date 11/30/2011
Fund Assets $79.95 million (05/31/2022)
Currency USD
Ticker MAINX
Cusip 577-125-503
Portfolio Turnover 62.2%
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
Fees & Expenses
Gross Expense Ratio 1.05%
Net Expense Ratio 1.05%

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 Asia Total Return Bond Fund
MAINX
-3.05% -6.41% -13.61% -15.48% -2.23% -0.22% 2.49% 2.47% 11/30/2011
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
-0.16% -5.11% -7.55% -8.99% 0.88% 1.88% 2.89% 3.07%
As of 03/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund
MAINX
-2.27% -9.79% -9.79% -11.14% -0.87% 1.08% 2.73% 2.94% 11/30/2011
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
-1.93% -4.45% -4.45% -4.33% 2.03% 2.82% 3.14% 3.45%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews Asia Total Return Bond Fund
MAINX
-4.06% 5.36% 13.00% -4.05% 9.40% 8.85% -0.58% 2.54% -0.50% 13.62%
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
-2.80% 7.95% 10.18% -0.59% 8.39% 3.79% -0.05% 6.37% -3.96% 11.59%

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.

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.

Yield

(as of 03/31/2022)
11.20% Yield to Worst
10.43% 30-Day SEC Yield
10.38% 30-Day SEC Yield (excluding expense waiver)

30-Day SEC Yield Source: BNY Mellon Investment Servicing (US) Inc.

Ratings

  • OVERALL
  • out of 266 funds
  • 3 YEAR
  • out of 266 funds
  • 5 YEAR
  • out of 224 funds
  • 10 YEAR
  • out of 82 funds
  • 1 YEAR
  • 4th
  • 244 out of 267 funds
  • 3 YEAR
  • 4th
  • 195 out of 250 funds
  • 5 YEAR
  • 3rd
  • 129 out of 218 funds
  • 10 YEAR
  • 2nd
  • 38 out of 87 funds
  • SINCE INCEPTION
  • 3rd
  • 49 out of 84 funds

Ratings agency calculation methodology

Portfolio Managers

Teresa  Kong, CFA photo
Teresa Kong, CFA

Lead Manager

Satya  Patel photo
Satya Patel

Co-Manager

Wei  Zhang photo
Wei Zhang

Co-Manager

Portfolio Characteristics

(as of 03/31/2022)
3.6
Modified Duration
43
Number of Positions

Source: BNY Mellon Investment Servicing (US) Inc.

Risk Metrics (3 Yr Return)

(as of 03/31/2022)
-3.61%
Alpha
1.88
Beta
133.96%
Upside Capture
184.19%
Downside Capture
-0.16
Sharpe Ratio
-0.47
Information Ratio
6.18%
Tracking Error
80.70

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Positions

(as of 05/31/2022)
Name Sector Currency % Net Assets
China Development Bank, 3.800%, 01/25/2036 Agency China Renminbi 6.0
Franshion Brilliant, Ltd., 6.000%, 02/08/2026 Financial Institutions U.S. Dollar 5.6
Wanda Properties International Co., Ltd., 7.250%, 01/29/2024 Financial Institutions U.S. Dollar 4.9
ESR Cayman, Ltd., 5.650%, 09/02/2068 Industrial Singapore Dollar 4.8
Periama Holdings LLC, 5.950%, 04/19/2026 Industrial U.S. Dollar 4.4
Luye Pharma Group, Ltd., Cnv., 1.500%, 07/09/2024 Industrial U.S. Dollar 4.4
Sino-Ocean Land Treasure III, Ltd., 4.900%, 03/21/2068 Agency U.S. Dollar 4.1
Indika Energy Capital III Pte, Ltd., 5.875%, 11/09/2024 Industrial U.S. Dollar 4.0
Malaysia Government Bond, 4.642%, 11/07/2033 Treasury Malaysian Ringgit 3.8
Standard Chartered PLC, 4.300%, 02/19/2068 Financial Institutions U.S. Dollar 3.0
TOTAL 45.0

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
  • Country Allocation
  • Currency Allocation
  • Quality Distribution
  • Asset Type Breakdown
Sector Fund
Other Financial 21.5
Government Owned, No Guarantee 17.5
Consumer Cyclical 14.2
Treasury 12.4
Basic Industry 9.5
Technology 8.1
Communications 5.9
Banking 5.4
Consumer Non-Cyclical 3.9
Cash and Other Assets, Less Liabilities 1.7

Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.
Sector data based on Bloomberg B Class Sector.
Source: Bloomberg

By issuer's country of risk Fund
China/Hong Kong 62.6
Indonesia 11.6
India 9.3
Malaysia 7.5
Thailand 3.3
South Korea 1.8
New Zealand 1.1
Taiwan 0.7
Singapore 0.5
Cash and Other Assets, Less Liabilities 1.7

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).

Currency Fund Contribution To Duration
U.S. Dollar 64.1 1.5
China Renminbi 9.4 0.9
South Korean Won 6.7 0.0
Singapore Dollar 5.8 0.2
Indonesian Rupiah 5.5 0.3
Malaysian Ringgit 4.7 0.4
Thai Baht 3.8 0.3

Cash and other assets may include forward currency exchange contracts and certain derivative instruments that have been marked-to-market.

Quality Distribution Fund
A- 4.7
BBB+ 2.3
BBB 5.4
BBB- 3.2
BB+ 3.9
BB 17.1
BB- 10.5
B+ 2.1
B 4.8
B- 0.6
CCC+ 2.6
CCC 0.5
CC 0.6
Not Rated 40.0
Cash and Other Assets, Less Liabilities 1.7

Credit quality is provided for the underlying bond holdings of the Fund and does not include common equities, cash and other assets and percentage values will not total 100%. Credit quality rating symbols reflect that of S&P and generally credit ratings range from AAA (highest) to D (lowest). When ratings from Moody's, S&P and Fitch are available for a bond in the Fund, the middle rating of the three is used. When two ratings are available, the lowest rating is used. When only one rating is provided, that one is used. Foreign government bonds without a specific rating are assigned the country rating provided by one of the three agencies. Securities that are not rated by any one of the three agencies are reflected as such.
Sources: FactSet Research Systems, Moody's, S&P and Fitch

Asset Type Fund
Corporate Bonds 59.9
Convertible Bonds 26.1
Government Bonds 12.4
Cash and Other Assets, Less Liabilities 1.7

Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.

Source: FactSet Research Systems unless otherwise noted.

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)
06/27/2022 06/28/2022 $0.03678 $0.00000 $0.00000 $0.03678 0.4% N.A.
05/23/2022 05/24/2022 $0.03352 $0.00000 $0.00000 $0.03352 0.4% N.A.
04/25/2022 04/26/2022 $0.03616 $0.00000 $0.00000 $0.03616 0.4% N.A.
03/28/2022 03/29/2022 $0.03409 $0.00000 $0.00000 $0.03409 0.4% N.A.
02/22/2022 02/23/2022 $0.03827 $0.00000 $0.00000 $0.03827 0.4% N.A.
01/24/2022 01/25/2022 $0.02001 $0.00000 $0.00000 $0.02001 0.2% N.A.
12/14/2021 12/15/2021 $0.07644 $0.00000 $0.01558 $0.09202 0.9% N.A.
11/17/2021 11/18/2021 $0.04706 $0.00000 $0.00000 $0.04706 0.4% N.A.
10/25/2021 10/26/2021 $0.03866 $0.00000 $0.00000 $0.03866 0.4% N.A.
09/27/2021 09/28/2021 $0.02919 $0.00000 $0.00000 $0.02919 0.3% N.A.
08/25/2021 08/26/2021 $0.03489 $0.00000 $0.00000 $0.03489 0.3% N.A.
07/26/2021 07/27/2021 $0.03277 $0.00000 $0.00000 $0.03277 0.3% N.A.
06/28/2021 06/29/2021 $0.03508 $0.00000 $0.00000 $0.03508 0.3% N.A.
05/25/2021 05/26/2021 $0.03462 $0.00000 $0.00000 $0.03462 0.3% N.A.
04/26/2021 04/27/2021 $0.03792 $0.00000 $0.00000 $0.03792 0.4% N.A.
03/24/2021 03/25/2021 $0.03311 $0.00000 $0.00000 $0.03311 0.3% N.A.
02/22/2021 02/23/2021 $0.02286 $0.00000 $0.00000 $0.02286 0.2% N.A.
01/25/2021 01/26/2021 $0.03261 $0.00000 $0.00000 $0.03261 0.3% 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 quarter ending March 31, 2022, the Matthews Asia Total Return Bond Fund returned -9.79% (Investor Class) and -9.81% (Institutional Class), while its benchmark, the 50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index, returned -4.45% over the same period.

Market Environment:

Market sentiment deteriorated significantly in the first quarter of the year with the average spread for high yield 124 basis points (1.24%) wider on the quarter, driven mostly by changes in China high yield real estate.  On interest rate and currency, the key themes for the first quarter were inflation and expectations of U.S. rate hikes. Inflation expectations were further exacerbated by the unexpected conflict between Russia and Ukraine which further pushed up energy prices. The latest inflation developments have caused the U.S. Federal Reserve to quicken its path of rate hikes. Higher U.S. interest rates also provided strength to the U.S. dollar, which appreciated against most Asian currencies in the first quarter. Expectations of higher U.S. interest rates and higher domestic inflation in most of Asian countries has also meant higher local interest rates.

The deterioration in China high yield real estate sector is mainly driven by continued defaults of weaker players in the sector and the lack of substantial improvement in contracted sales. While we have seen macro policies on real estate to continue to ease, the recovery is hampered by sporadic COVID-19 outbreaks in key cities such as Shenzhen and Shanghai. Sentiment deteriorated further until China’s Financial Stability and Development Committee made a public announcement reassuring the market that further policies will be implemented to stabilize the sector. Market sentiment has seen a partial recovery on the announcement while cautiously waiting for further specific policy implementation.

Performance Contributors and Detractors:

The Fund’s Chinese corporate bonds, including Logan Group, KWG Group and Times China underperformed the benchmark due to an overweight in China real estate and selection effect. All three are China real estate developers impacted by the overall China real estate tight funding conditions.  On the other hand, South Korea, Philippines and Indonesia outperformed on the back of both selection and underweight relative to the benchmark. Within the corporate bond portion of the portfolio, China Development Bank, ESR Cayman, and Indika Energy were the top three contributors. China Development Bank is a government owned policy bank. ESR Cayman is a real estate investment firm with real estate assets across Asia. Indika Energy is an Indonesia energy company with businesses in power generation, procurement, and energy related construction.

Notable Portfolio Changes:

During the quarter, we exited positions that reached our price targets or had asymmetric risks to the downside. For example, we exited China pharmaceutical positions such as Hansoh Pharmaceutical and Pharmaron Beijing as regulatory risks no longer justify the risks associated with these positions. We also adjusted the portfolio’s currency exposure be more overweight U.S. dollar and underweight Asia local currencies. We believe the recent uncertainties around inflation and geopolitical risk will continue to support a strong U.S. dollar view. Lastly, we added two bond positions outside of China: Australian accounting software company Xero Investments and Thai commercial bank Bangkok Bank.

Outlook:

The unexpected conflict between Russia and Ukraine, higher prices across energy, soft and hard commodities have put further pressure on inflation. The U.S. Federal Reserve will likely err on the side of faster rate hikes and interest rates in the U.S. will be under further pressure to rise in the medium term. We believe higher U.S. rates will put pressure on Asian central banks to raise interest rate or face more currency depreciation pressures. We do not believe the next few quarters to be favorable to Asian local rates or currencies and have taken steps to reduce the portfolio’s local rates and currency exposures.

With China policy turning definitively more positive at a faster pace, we are seeing the turning point in China policy cycle. With the country’s policy cycles leading economic cycles, we expect the current environment to provide good opportunities to add risk. However, the full effectiveness of easing policies are being muted by China’s dynamic zero COVID policy leading to periodic lockdowns of major urban areas. Recent COVID outbreaks in key cities such as Shenzhen and Shanghai have put China’s annual growth target of 5.5% at risk. To reach this growth target, we expect more proactive fiscal and monetary policy to emerge in the second quarter in support of growth. Thus, we expect the weak market sentiment to continue to see higher-than-usual short-term price volatility in markets.

The biggest risks in our portfolio remain the China property companies. With China property bonds across sub-investment grade trading at distressed levels, the market is already pricing in high probabilities of restructuring. While the offshore U.S. dollar-denominated market continues to be shut to most sub-investment grade property developers, there are signs that Chinese banks might be stepping in to provide liquidity. For example, Country Garden—a property development company based in Guangdong—was able to secure a facility of 40 billion renminbi (~US$ 6 billion) from the Agricultural Bank of China as part of a strategic partnership. We are optimistic that more Chinese banks will see the opportunity to step in to be lenders of last resort to bridge the financing gap for the sector.

 

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 - MAINX as of 03/31/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-11.14% -0.87% 1.08% 2.73% 2.94% 11/30/2011

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 1.05%
Net Expense Ratio 1.05%

Matthews has contractually agreed to waive fees and reimburse expenses to limit the Total Annual Fund Operating Expenses until April 30, 2023. Please see the Fund’s prospectus for additional details.

Yields as of 03/31/2022
Yield to Worst 11.20%
30-Day SEC Yield 10.43%
30-Day SEC Yield (excluding expense waiver) 10.38%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 03/31/2022, 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  (“YTW”) is the lowest potential yield a bond can receive without defaulting and is for the underlying bond-only portion of the portfolio, excluding securities that trade without accrued interest. YTW 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. YTW 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.

 

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.