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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

-3.32%

YTD Return

(as of 07/30/2021)

$10.65

Price

(as of 07/30/2021)

$139.97 million

Fund Assets

(as of 06/30/2021)

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 $139.97 million (06/30/2021)
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 1.15%
Net Expense Ratio 1.12%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 06/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund
MAINX
0.42% 1.09% -1.63% 7.57% 5.20% 4.80% n.a. 4.57% 11/30/2011
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
-0.35% 1.36% -1.61% 4.27% 6.22% 4.12% n.a. 4.35%
As of 06/30/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund
MAINX
0.42% 1.09% -1.63% 7.57% 5.20% 4.80% n.a. 4.57% 11/30/2011
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index
-0.35% 1.36% -1.61% 4.27% 6.22% 4.12% n.a. 4.35%
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 06/30/2021)

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 06/30/2021)
8.85% Yield to Worst
7.49% 30-Day SEC Yield
7.49% 30-Day SEC Yield (excluding expense waiver)

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

Ratings

  • OVERALL
  • out of 245 funds
  • 3 YEAR
  • out of 245 funds
  • 5 YEAR
  • out of 196 funds
  • 1 YEAR
  • 4th
  • 225 out of 261 funds
  • 3 YEAR
  • 4th
  • 187 out of 242 funds
  • 5 YEAR
  • 2nd
  • 81 out of 195 funds
  • SINCE INCEPTION
  • 3rd
  • 47 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 06/30/2021)
4.2
Modified Duration
55
Number of Positions

Source: BNY Mellon Investment Servicing (US) Inc.

Top 10 Positions

(as of 06/30/2021)
Name Sector Currency % Net Assets
Network i2i, Ltd., 5.650%, 04/15/2068 Communication Services U.S. Dollar 4.7
Viet Nam Debt & Asset Trading Corp., 1.000%, 10/10/2025 Financials U.S. Dollar 4.0
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 3.5
ABJA Investment Co. Pte, Ltd., 5.450%, 01/24/2028 Materials U.S. Dollar 3.4
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
Sino-Ocean Land Treasure III, Ltd., 4.900%, 03/21/2068 Real Estate U.S. Dollar 3.1
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 2.9
TOTAL 35.1

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 06/30/2021)
  • Sector Allocation
  • Country Allocation
  • Currency Allocation
  • Quality Distribution
  • Asset Type Breakdown
Sector Fund
Real Estate 25.0
Financials 20.2
Foreign Government Bonds 17.3
Communication Services 7.6
Consumer Discretionary 7.0
Health Care 6.8
Materials 6.4
Energy 3.2
Industrials 2.2
Information Technology 1.5
Cash and Other Assets, Less Liabilities 2.8

"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 51.9
India 14.8
Indonesia 9.4
Malaysia 6.8
Thailand 4.6
Philippines 4.0
Vietnam 4.0
South Korea 1.0
New Zealand 0.8
Cash and Other Assets, Less Liabilities 2.8

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 55.1 2.3
China Renminbi 10.1 0.6
South Korean Won 9.2 0.0
Singapore Dollar 6.1 0.0
Indonesian Rupiah 5.9 0.4
Malaysian Ringgit 5.0 0.4
Thailand Baht 3.9 0.4
Philippines Peso 3.5 0.0
Indian Rupee 1.2 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+ 1.6
BBB 7.6
BBB- 0.5
BB+ 4.6
BB 16.0
BB- 17.4
B+ 6.2
B 6.5
CCC+ 1.2
Not Rated 30.7
Cash and Other Assets, Less Liabilities 2.8

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 64.1
Government Bonds 18.0
Convertible Bonds 15.1
Cash and Other Assets, Less Liabilities 2.8

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)
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.
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 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
1YR 3YR 5YR 10YR Since Inception Inception Date
7.57% 5.20% 4.80% 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 1.15%
Net Expense Ratio 1.12%

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
Yield to Worst 8.85%
30-Day SEC Yield 7.49%
30-Day SEC Yield (excluding expense waiver) 7.49%

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.

 

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.