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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

-4.30%

YTD Return

(as of 04/14/2021)

$10.68

Price

(as of 04/14/2021)

$136.65 million

Fund Assets

(as of 03/31/2021)

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.

The risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 11/30/2011
Fund Assets $136.65 million (03/31/2021)
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
Fees & Expenses
Gross Expense Ratio 1.08%
Net Expense Ratio 1.07%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 03/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund
MAINX
-1.24% -2.69% -2.69% 17.39% 2.95% 5.09% n.a. 4.57% 11/30/2011
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
-1.31% -2.93% -2.93% 8.79% 4.76% 4.23% n.a. 4.32%
As of 03/31/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund
MAINX
-1.24% -2.69% -2.69% 17.39% 2.95% 5.09% n.a. 4.57% 11/30/2011
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
-1.31% -2.93% -2.93% 8.79% 4.76% 4.23% n.a. 4.32%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews Asia Total Return Bond Fund
MAINX
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
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 03/31/2021)

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.

Yield

(as of 03/31/2021)
7.17% Yield to Worst
5.83% 30-Day SEC Yield
6.05% 30-Day SEC Yield (excluding expense waiver)

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

Ratings

  • OVERALL
  • out of 241 funds
  • 3 YEAR
  • out of 241 funds
  • 5 YEAR
  • out of 192 funds
  • 1 YEAR
  • 4th
  • 201 out of 258 funds
  • 3 YEAR
  • 3rd
  • 123 out of 240 funds
  • 5 YEAR
  • 2nd
  • 81 out of 194 funds
  • SINCE INCEPTION
  • 2nd
  • 39 out of 85 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 03/31/2021)
4.3
Modified Duration
52
Number of Positions

Source: BNY Mellon Investment Servicing (US) Inc.

Top 10 Positions

(as of 03/31/2021)
Name Sector Currency % Net Assets
Network i2i, Ltd., 5.650%, 04/15/2068 Communication Services U.S. Dollar 4.8
Viet Nam Debt & Asset Trading Corp., 1.000%, 10/10/2025 Financials U.S. Dollar 3.9
Wanda Properties International Co., Ltd., 7.250%, 01/29/2024 Real Estate U.S. Dollar 3.8
Luye Pharma Group, Ltd., Cnv., 1.500%, 07/09/2024 Health Care U.S. Dollar 3.6
Franshion Brilliant, Ltd., 6.000%, 08/08/2068 Real Estate U.S. Dollar 3.4
China Development Bank, 3.800%, 01/25/2036 Foreign Government Bonds China Renminbi 3.3
ABJA Investment Co. Pte, Ltd., 5.450%, 01/24/2028 Materials U.S. Dollar 3.3
Sino-Ocean Land Treasure III, Ltd., 4.900%, 03/21/2068 Real Estate U.S. Dollar 3.2
Periama Holdings LLC, 5.950%, 04/19/2026 Materials U.S. Dollar 3.0
Kasikornbank Public Co., Ltd., 5.275%, 04/14/2068 Financials U.S. Dollar 3.0
TOTAL 35.3

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 03/31/2021)
  • Sector Allocation
  • Country Allocation
  • Currency Allocation
  • Quality Distribution
  • Asset Type Breakdown
Sector Fund
Real Estate 25.5
Financials 20.4
Foreign Government Bonds 18.4
Communication Services 8.1
Consumer Discretionary 6.5
Materials 6.3
Health Care 5.3
Energy 3.2
Industrials 2.2
Information Technology 0.8
Cash and Other Assets, Less Liabilities 3.3

"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.

By issuer's country of risk Fund
China/Hong Kong 47.4
India 14.8
Indonesia 9.4
Thailand 7.2
Malaysia 6.9
Philippines 5.0
Vietnam 3.9
South Korea 1.4
New Zealand 0.8
Cash and Other Assets, Less Liabilities 3.3

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 49.1 2.2
China Renminbi 10.6 0.6
South Korean Won 8.8 0.0
Singapore Dollar 7.3 0.0
Indonesian Rupiah 5.9 0.4
Malaysian Ringgit 5.1 0.5
Philippines Peso 4.9 0.1
Thailand Baht 4.8 0.5
Indian Rupee 3.4 0.0

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

Quality Distribution Fund
A- 4.8
BBB+ 1.7
BBB 8.6
BB+ 3.2
BB 16.2
BB- 15.6
B+ 9.8
B 6.7
CCC+ 1.2
Not Rated 29.0
Cash and Other Assets, Less Liabilities 3.3

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 65.0
Government Bonds 19.0
Convertible Bonds 12.8
Cash and Other Assets, Less Liabilities 3.3

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

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)
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.
12/15/2020 12/16/2020 $0.08400 $0.00000 $0.00000 $0.08400 0.8% N.A.
11/18/2020 11/19/2020 $0.03377 $0.00000 $0.00000 $0.03377 0.3% N.A.
10/26/2020 10/27/2020 $0.03521 $0.00000 $0.00000 $0.03521 0.3% N.A.
09/28/2020 09/29/2020 $0.03922 $0.00000 $0.00000 $0.03922 0.4% N.A.
08/27/2020 08/27/2020 $0.03914 $0.00000 $0.00000 $0.03914 0.4% N.A.
07/27/2020 07/28/2020 $0.03460 $0.00000 $0.00000 $0.03460 0.3% N.A.
06/24/2020 06/25/2020 $0.03790 $0.00000 $0.00000 $0.03790 0.4% N.A.
05/26/2020 05/27/2020 $0.02973 $0.00000 $0.00000 $0.02973 0.3% N.A.
04/27/2020 04/28/2020 $0.00347 $0.00000 $0.00000 $0.00347 0.0% N.A.
03/25/2020 03/26/2020 $0.03723 $0.00000 $0.00000 $0.03723 0.4% N.A.
02/26/2020 02/27/2020 $0.06300 $0.00000 $0.00000 $0.06300 0.6% 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, 2021

For the quarter ending March 31, 2021, the Matthews Asia Total Return Bond Fund returned -2.69% (Investor Class) and -2.66% (Institutional Class), while its benchmark, the 50% Markit iBoxx Asian Local Bond/ 50% J.P. Morgan Asia Credit Index returned -2.93%.

Market Discussion:

The markets started 2021 ebullient. Over the last couple of quarters, the market euphoria was finally matched in part by a recovery in the real economy. The COVID lockdowns were easing (albeit sporadically), vaccine rollouts looked finally to be on track and additional fiscal stimulus was forthcoming in the U.S. The global economy was recovering at a steady pace with Global Purchasing Manufacturing Index hitting 53.9 in February 2021—the highest level since early 2018.[i]What was more, rates were low, pushing investors into riskier asset classes for return and justifying higher valuations. However, the first quarter became somewhat of a pivot. As the economy recovered, inflation also started to tick up. From pure base effects driven by the collapse in oil prices in March 2020, we should see Consumer Price Index (measure of average change in prices that consumers pay for a basket of goods and services) rise globally starting in March of 2021. Fears of rising inflation, and what the Fed might do in response to it, began to circulate. This drove up U.S. rates, with the 10-year Treasury yields rising by 83 basis points (0.83%)—a dramatic push higher. Part of the Goldilocks conditions was eroding. Volatility picked up and equity markets sold-off for much of March.

Taken together, the losing asset classes in the first quarter were bonds, especially high-duration bonds and local currencies, whose carry (or short-term interest rate differential relative to the U.S.) declined as U.S. rates rose. Within Asian bonds, high yield outperformed investment grade and U.S. dollar bonds outperformed local bonds. Asset classes with positive correlation to inflation led returns, such as equities and commodities. Within equities, a dramatic rotation took place with value stocks outperforming growth stocks.

Performance Contributors and Detractors:

In general, our local currency positions outperformed the benchmark, led by positions in Singapore dollar, Thai baht and Indian rupee. The outperformance was driven by our underweight in U.S. dollar and local currency duration, which provided some shelter in the rising rate environment in the first quarter.

Within U.S. dollar-denominated bonds, the biggest contributors came from convertible bonds, such as Chinese pharmaceutical company Luye Pharma and Daum, the issuing entity of Kakao, a Korean online messaging and e-commerce platform. The biggest detractor came from PB International (Pan Brothers), an Indonesian textile manufacturer, which is currently in negotiations with bankers to roll over maturing bank loans.

Notable Portfolio Changes:

Throughout the quarter, we gradually reduced the overweight in Asian currencies across the board, bringing the portfolio to a neutral U.S. dollar position. As U.S. rates rise, local currency should suffer as carry is reduced and we thought an adjustment in consideration of this fact was appropriate.

We added to duration in China because we believe there was sufficient yield cushion to weather rising rates.

In terms of corporates, we exited Poseidon Finance and Syngenta as these positions approached our price targets and from the potential forced divestment as Executive Order 13959 (EO) came into enforcement.[1] The EO targeted Chinese State-Owned Enterprises tied to the military as potential targets of divestment but interpretation could be broadened to include partial subsidiaries of name entities. We reinvested proceeds in Chinese tech convertible bonds, such as NIO, Baozun, Pinduoduo, and iQiyi, because we felt that there was value emerging after a sell-off in Chinese tech names. We also added three banks, Kasikornbank, Krung Thai Bank, and CIMB Group, which should benefit from cyclical upturns in Asia.

Outlook:

As real activity recovers, we’d expect cyclical growth to outpace secular growth. Value sectors of the market should see bigger improvements in revenue and financial performance. As such, we believe Asian high yield corporates stand to gain the most within Asian fixed income, as the asset class is comprised mostly of cyclical sectors—manufacturing, commodities, industrials and financials. These should be the top beneficiaries of an upswing in global economic activity.

The biggest risk is still rising rates, especially a sudden acceleration in rates driven by a surprise policy move. As the economy recovers, inflation should naturally recover and we’d expect rates to rise in pace with rising activity. This is good. After all, rates are still low and still have ample room to rise. The biggest risk is an impatient Fed, which forces rates higher. This is not our base case since Fed Chair Powell has consistently signaled that the Fed will remain patient and allow the economy to run hot before beginning the tightening process. We believe that when the time comes, the Fed will take care to normalize policy in a gradual and well-telegraphed way.

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 before thinking about raising the interest rate.

To summarize, we believe that an overweight in high yield corporates is the best strategy for the environment we are in—one of rising cyclical activity and rising risk-free rates. We remain short duration relative to the benchmark. Within local currency bonds, we believe some Asian bonds can outperform U.S. rates, although this requires more careful selection as carry cushions have declined.

 

As of March 31, 2021, the securities mentioned comprised the Matthews Asia Total Return Bond Fund in the following percentages: Luye Pharma Group, Ltd., Cnv., 1.500%, 07/09/2024, 3.6%; Kakao Corp., Cnv., 0.000%, 04/28/2023, 1.4%; PB International BV, 7.625%, 01/26/2022, 1.2%; NIO, Inc., Cnv., 0.500%, 02/01/2027, 1.1%; Baozun, Inc., Cnv., 1.625%, 05/01/2024, 1.1%; Pinduoduo, Inc., Cnv., 0.000%, 12/01/2025, 0.5%; iQIYI, Inc., Cnv., 2.000%, 04/01/2025, 0.7%; Kasikornbank Public Co., Ltd., 5.275%, 04/14/2068, 3.0%; Krung Thai Bank Public Co., Ltd., 4.400%, 09/25/2068, 2.5%; Cerah Capital, Ltd. (CIMB Group), 0.000%, Cnv., 08/08/2024, 2.1%

The Fund held no positions in Poseidon Finance and Syngenta Finance. Current and future portfolio holdings are subject to change and risk.

 

Average Annual Total Returns - MAINX as of 03/31/2021
1YR 3YR 5YR 10YR Since Inception Inception Date
17.39% 2.95% 5.09% N.A. 4.57% 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 1.08%
Net Expense Ratio 1.07%

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 03/31/2021
Yield to Worst 7.17%
30-Day SEC Yield 5.83%
30-Day SEC Yield (excluding expense waiver) 6.05%

The 30-Day SEC Yield represents net investment income earned by the Fund over the 30-day period ended 03/31/2021, 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.

 

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.