The Fund's name changed from Matthews Asia Strategic Income Fund to the Matthews Asia Total Return Bond Fund on January 31, 2020.
11/30/2011
Inception Date
-1.07%
YTD Return
(as of 01/15/2021)
$11.13
Price
(as of 01/15/2021)
$114.85 million
Fund Assets
(as of 12/31/2020)
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 | $114.85 million (12/31/2020) | |
| Currency | USD | |
| Ticker | MAINX | |
| Cusip | 577-125-503 | |
| Portfolio Turnover | 84.38% | |
| Benchmark | 50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index Markit iBoxx Asian Local Bond Index | |
| Geographic Focus | Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region | |
| Gross Expense Ratio | 1.08% | |
| Net Expense Ratio | 1.07% | |
Source: BNY Mellon Investment Servicing (US) Inc., Index data from HSBC, iBoxx (Markit). All performance is in US$.
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.
Effective January 31, 2020, the Fund changed its benchmark to a blended benchmark comprised of 50% Markit iBoxx Asian Local Bond Index (ALBI) and 50% J.P. Morgan Asia Credit Index (JACI). Prior to January 31, 2020, the Fund's benchmark was the Markit iBoxx Asian Local Bond Index. Matthews believes that the blended benchmark is more appropriate in light of the Fund's current investment strategy.
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 Yield Source: BNY Mellon Investment Servicing (US) Inc.
Ratings (as of 12/31/2020)
CATEGORY: Emerging Markets Bond
Quartile & Rankings (as of 12/31/2020)
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.
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 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 September 30, 2020
MAINX - Investor Class Commentary MINCX - Institutional Class CommentaryFor the quarter ending September 30, 2020, the Matthews Asia Total Return Bond Fund returned 3.74% (Investor Class) and 3.79% (Institutional Class), while its benchmark, the 50% Markit iBoxx Asia Local Bond Index (ALBI) / 50% JP Morgan Asia Credit Index (JACI), returned 2.19%.
Market Environment:
Despite the once-in-a-century pandemic that gripped the world this year, markets have remained relentlessly optimistic in recent months even in the face of recessionary economic data and poor COVID-19 outcomes throughout much of the world. It was unusual for risk-on assets, like U.S. growth stocks, as well as safe-haven assets, like 10-year U.S. Treasuries, to achieve all-time highs in the same month of August. Within Asian credit, high yield outperformed investment grade as investors felt more comfortable taking more risk for more yield. Asian currencies, on average, were stronger versus the U.S. dollar. It was looking like the Roaring Twenties (2020s that is), even as a second wave of COVID cases hit the U.S. and later, Europe.
Perhaps optimism had outstripped the fundamental realities too far to begin the quarter. September was a risk-off month as markets focused more on the potential bad news—an uncertain result on U.S. Election Day, impasse over a second stimulus package, growing second-waves in Europe forcing more shut-downs and a more delayed timeline for a COVID vaccine. The best performers of August became the worst performers in September. The dollar rose, especially versus emerging market (EM) currencies, whose countries face growing COVID cases and lack the economic resilience and toolkit to combat them.
Within Asian credit, volatility continues to plague companies with the highest credit risks, especially ones with high leverage and upcoming refinancing needs. The markets need to see a clear path to refinancing for these companies before pricing them higher. On the other hand, investment grade and relatively higher quality high yield companies, such as Chinese property companies, have mostly recovered and many breached new highs in the third quarter.
Performance Contributors and Detractors:
The primary drivers of performance during the third quarter were the U.S. dollar-denominated (USD) high yield holdings in the portfolio. Within USD high yield, the three biggest contributors to returns were China issuers, including two China property developers: Dalian Wanda and China Franshion, as well as a China internet company, JD.com. These bonds rose largely based on the improving fundamentals in China.
The biggest detractors to performance this quarter came from the bonds of Indonesian garment manufacturer PB International, Philippines-based fast food chain Jollibee’s, as well as Thai government bonds. PB International’s bonds fell when Moody’s downgraded the company based on its upcoming financing needs and increased working capital needs from an elongated working capital cycle. PB International pivoted part of its production from high tech garments to personal protection equipment. Jollibee’s bond prices fell as revenues continue to remain tepid given the slow pace of reopening and consumer spend in its markets. The price of Thai government bonds fell as yields rose in the quarter.
During the quarter currency was a slightly positive contributor to performance, with gains in Chinese renminbi overweight partially offset losses due to Indonesian rupiah and the Korean won underweight.
Notable Portfolio Changes:
In the third quarter, we exited our positions Chinese internet companies JD.com and Weibo, as these had recovered from the crisis and had reached our price targets. We deployed the funds to add Chinese property developer Times China and the convertible bonds of Poseidon Finance, a financing entity under China Shipbuilding Investment Corporation, a state-owned Chinese shipbuilder exchangeable into Postal Savings Bank of China. We initiated these positions based on their attractive relative value and their strong fundamentals.
On the local currency side, we added China Cinda’s renminbi-denominated bonds to increase our exposure to China currency and rates. We also added local currency-denominated bonds of the Philippines and Malaysia on the expectation that their currencies and rates have room to outperform those of other riskier Asia markets.
Outlook:
We expect the fourth quarter to be an event-driven quarter. Driving volatility will be the U.S. election, debates over a new stimulus package, the relative success of countries response to the pandemic and potential breakthroughs in COVID-19 testing/vaccines/treatment. We recognize that the global economic recovery is still fragile and could worsen if global COVID cases rise or fiscal stimulus lapses. We have already seen geo-political risks resurfacing, in particular between U.S. and China. Despite the Phase One trade agreement having been signed in January 2020, we believe the risk of rising U.S. – China political tensions remains.
On the other hand, we also see potential upside for the market and Asian credit specifically if any of the events listed above turns out positively. In the face of this uncertainty, our strategy will be barbelled, looking to add both high-quality, relatively low risk credit duration and companies that have been disproportionately hurt by the pandemic or recessionary fears, but with room to rally if risk sentiment turns positive. Looking at the medium to long term, we still believe that Asia USD high yield bonds offer the most attractive risk-adjusted returns and we will continue to allocate to this space when we find opportunities.
With the market continuing to reassess the pace of economic recovery, the U.S. 10-year interest rate is on net 3 basis points (0.03%) higher for the quarter. In Asia, we expect to see relatively muted movements in interest rates for most countries. After having reduced interest rates in most Asia countries, we believe some Asia central banks are taking a wait and see approach to additional interest rate cuts.
For currencies, the dispersion of performance going forward will be higher. While a general recovery in risk sentiment helps all Asian currencies, we are mindful of differences between countries, including both country specific macro fundamentals and where each country is relative to the virus cycle.
As of September 30, 2020, the securities mentioned comprised the Matthews Asia Total Return Bonds Fund in the following percentages: Wanda Properties International Co., Ltd., 7.250%, 01/29/2024, 4.9%; PB International BV, 7.625%, 01/26/202, 4.0%; Poseidon Finance 1, Ltd., Cnv., 0.000%, 02/01/2025, 3.1%; Franshion Brilliant, Ltd., 5.750%, 07/17/2067, 3.0%; Times China Holdings, Ltd., 6.200%, 03/22/2026, 2.6%; Poseidon Finance 1, Ltd., Cnv., 0.000%, 02/01/2025, 3.1%; Thailand Government Bond, 1.600%, 12/17/2029, 2.2%; China Cinda Asset Management Co., Ltd., 5.500%, 03/14/2028, 1.5%; Jollibee Worldwide Pte, Ltd., 3.900%, 07/23/2068, 1.4%. The Fund held no positions in JD.com, Inc.; Weibo Corp. Current and future portfolio holdings are subject to change and risk.
Average Annual Total Returns - MAINX as of 12/31/2020
Fees & Expenses
Matthews has contractually agreed (i) to waive fees and reimburse expenses to the extent needed to limit Total Annual Fund Operating Expenses (excluding Rule 12b-1 fees, taxes, interest, brokerage commissions, short sale dividend expenses, expenses incurred in connection with any merger or reorganization or extraordinary expenses such as litigation) of the Institutional Class to 0.90% first by waiving class specific expenses (e.g., shareholder service fees specific to a particular class) of the Institutional Class and then, to the extent necessary, by waiving non-class specific expenses (e.g., custody fees) of the Institutional Class, and (ii) if any Fund-wide expenses (i.e., expenses that apply to both the Institutional Class and the Investor Class) are waived for the Institutional Class to maintain the 0.90% expense limitation, to waive an equal amount (in annual percentage terms) of those same expenses for the Investor Class. The Total Annual Fund Operating Expenses After Fee Waiver and Expense Reimbursement for the Investor Class may vary from year to year and will in some years exceed 0.90%. Any amount waived with respect to the Fund pursuant to this agreement is not subject to recoupment. This agreement will remain in place until April 30, 2021 and may be terminated at any time by the Board of Trustees on behalf of the Fund on 60 days’ written notice to Matthews. Matthews may decline to renew this agreement by written notice to the Trust at least 30 days before its annual expiration date.
Yields as of 12/31/2020
The 30-Day Yield represents net investment income earned by the Fund over the 30-day period ended 12/31/2020, expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-day period. The 30-Day 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.