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Matthews Asia Innovators Fund
MATFX

Snapshot
  • High-conviction, concentrated equity portfolio of innovative companies in Asia ex Japan
  • All-cap fundamental approach focused on companies with unique offerings that create or expand markets
  • Capitalizing on the new economy and the rising disposable income in Asia

12/27/1999

Inception Date

-23.01%

YTD Return

(as of 12/05/2022)

$14.52

NAV

(as of 12/05/2022)

-0.16

1 Day NAV Change

(as of 12/05/2022)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Asia Innovators Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies located in Asia that Matthews believes are innovators in their products, services, processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets. The Fund seeks to invest in companies capable of sustainable growth based on the fundamental characteristics of those companies, including balance sheet information; number of employees; size and stability of cash flow; management’s depth, adaptability and integrity; product lines; marketing strategies; corporate governance; and financial health.

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. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. Sector funds may be subject to a higher degree of market risk than diversified funds because of a concentration in a specific sector. The Fund's value may be affected by changes in the science and technology-related industries.

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

Fund Facts
Inception Date 12/27/1999
Fund Assets $485.15 million (10/31/2022)
Currency USD
Ticker MATFX
Cusip 577-130-883
Portfolio Turnover 220.5%
Benchmark MSCI All Country Asia ex Japan 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 1.09%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 10/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund - MATFX
12/27/1999
MATFX
-10.79% -20.63% -38.18% -44.68% 2.71% 2.13% 9.11% 3.61%
MSCI All Country Asia ex Japan Index
-6.09% -18.02% -32.03% -33.74% -4.51% -3.05% 2.70% 4.67%
As of 09/30/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovators Fund - MATFX
12/27/1999
MATFX
-11.45% -14.58% -30.70% -35.43% 8.38% 5.40% 9.88% 4.15%
MSCI All Country Asia ex Japan Index
-12.73% -13.69% -27.62% -28.48% -1.03% -0.91% 3.32% 4.97%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
Matthews Asia Innovators Fund - MATFX
MATFX
-13.10% 86.72% 29.60% -18.62% 52.88% -9.10% 4.48% 9.24% 35.61% 14.11%
MSCI All Country Asia ex Japan Index
-4.46% 25.36% 18.52% -14.12% 42.08% 5.76% -8.90% 5.11% 3.34% 22.70%

MSCI AC Asia Ex Japan Index since inception value calculated from 12/31/99.

Source: BNY Mellon Investment Servicing (US) Inc. 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.

Growth of a Hypothetical $10,000 Investment Since Inception

(as of 09/30/2022)

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.

Ratings

  • OVERALL
  • out of 52 funds
  • 3 YEAR
  • out of 52 funds
  • 5 YEAR
  • out of 47 funds
  • 10 YEAR
  • out of 35 funds
  • 1 YEAR
  • 4th
  • 32 out of 36 funds
  • 3 YEAR
  • 1st
  • 2 out of 35 funds
  • 5 YEAR
  • 1st
  • 2 out of 31 funds
  • 10 YEAR
  • 1st
  • 1 out of 21 funds
  • SINCE INCEPTION
  • 3rd
  • 8 out of 11 funds

Ratings agency calculation methodology

Portfolio Managers

Michael J. Oh, CFA photo
Michael J. Oh, CFA

Lead Manager

Taizo  Ishida photo
Taizo Ishida

Co-Manager

Portfolio Characteristics

(as of 09/30/2022)
Fund Benchmark
Number of Positions 43 1,205
Weighted Average Market Cap $65.9 billion $86.3 billion
Active Share 79.7 n.a.
P/E using FY1 estimates 20.9x 10.7x
P/E using FY2 estimates 17.6x 10.2x
Price/Cash Flow 14.7 6.3
Price/Book 2.8 1.4
Return On Equity 3.3 14.6
EPS Growth (3 Yr) 3.6% 11.4%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 09/30/2022)
10.70%
Alpha
1.10
Beta
132.86%
Upside Capture
90.02%
Downside Capture
0.33
Sharpe Ratio
0.72
Information Ratio
12.98%
Tracking Error
70.82

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 11/30/2022)
Name Sector Country % Net Assets
Tencent Holdings, Ltd. Communication Services China/Hong Kong 5.1
HDFC Bank, Ltd. Financials India 4.9
Meituan Consumer Discretionary China/Hong Kong 4.7
Pinduoduo, Inc. Consumer Discretionary China/Hong Kong 4.6
Alibaba Group Holding, Ltd. Consumer Discretionary China/Hong Kong 4.6
JD.com, Inc. Consumer Discretionary China/Hong Kong 4.3
KE Holdings, Inc. Real Estate China/Hong Kong 4.2
Trip.com Group, Ltd. Consumer Discretionary China/Hong Kong 4.2
H World Group, Ltd. Consumer Discretionary China/Hong Kong 4.1
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 3.8
TOTAL 44.5

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 09/30/2022)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Consumer Discretionary 35.4 15.1 20.3
Financials 24.9 21.1 3.8
Communication Services 10.7 9.7 1.0
Information Technology 6.8 20.8 -14.0
Consumer Staples 6.4 5.8 0.6
Industrials 5.5 6.7 -1.2
Health Care 3.4 3.9 -0.5
Real Estate 2.7 4.1 -1.4
Materials 2.6 5.5 -2.9
Energy 2.1 3.9 -1.8
Utilities 0.0 3.3 -3.3
Liabilities in Excess of Cash and Other Assets -0.3 0.0 -0.3

Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.

Country Fund Benchmark Difference
China/Hong Kong 55.6 43.3 12.3
India 24.5 17.5 7.0
South Korea 6.3 12.2 -5.9
Indonesia 4.5 2.5 2.0
Singapore 4.0 3.9 0.1
Vietnam 2.4 0.0 2.4
Taiwan 1.7 15.6 -13.9
United States 1.3 0.0 1.3
Thailand 0.0 2.4 -2.4
Malaysia 0.0 1.7 -1.7
Philippines 0.0 0.8 -0.8
Liabilities in Excess of Cash and Other Assets -0.3 0.0 -0.3

Not all countries are included in the benchmark index(es).

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 60.7 56.1 4.6
Large Cap ($10B-$25B) 26.6 21.0 5.6
Mid Cap ($3B-$10B) 10.3 19.3 -9.0
Small Cap (under $3B) 2.8 3.5 -0.7
Liabilities in Excess of Cash and Other Assets -0.3 0.0 -0.3

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)
12/14/2021 12/15/2021 $0.00000 $1.10849 $3.22827 $4.33676 18.5% 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 September 30, 2022

For the quarter ending September 30, 2022, the Matthews Asia Innovators Fund returned -14.58% (Investor Class) and -14.53% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -13.69%.

Market Environment:

The third quarter was again a challenging period for emerging and Asian equity markets. Elevated inflation data continued and diminishing consumer spending in many regions dampened global sentiment and continued to spark recessionary fears. While Asian equity markets endured the choppy waters relatively better in the second quarter, experiencing less downside than commodity heavy, weak-performing EMEA (Europe, Middle East, Africa) and LatAm regions, most of the gains were lost during the third quarter. In particular, Chinese equities saw a sharp downturn amid spillover of China’s real estate woes into its broader economy and lingering COVID restrictions. In addition, both South Korean and Taiwan markets were weak which were concentrated in September. India continues to be among the few bright spots in Asia and Southeast Asian countries such as Indonesia and the Philippines also performed relatively better than North Asia, while Vietnam, which has held up quite well in the past 12-month period, experienced a sharp downturn.

Performance Contributors and Detractors:

From a regional perspective, the Fund’s overweight and stock selection within China/Hong Kong detracted the most from the portfolio’s absolute and relative performance for the quarter. China/Hong Kong companies suffered from China’s ongoing zero-COVID policy and weakening property markets leading to poor consumer sentiment. On the other hand, the Fund’s overweight and stock selection within India contributed the most to Fund performance. India continues to be a bright spot in this tough market environment and the Fund continues to maintain a significant overweight position relative to the benchmark. India companies in general has been relatively stable and relatively unharmed by regulatory issues elsewhere in the region. India has also been relatively free from the political dispute between China and the U.S. However, valuations in some segments of the Indian market are stretched so we will continue to monitor the market closely. From a sector perspective, our stock selection within financials and information technology contributed the most to relative performance while our overweight and stock selection within consumer discretionary detracted the most from relative performance.

Turning to individual securities, Indian financial holdings were the best performers during the quarter. ICICI Bank and Bajaj Finance were top two contributors. The private banking sector in India continued its strong growth and recovery from COVID, and valuations remain relatively attractive despite strong performance year to date. Bank Mandiri in Indonesia also performed well during the quarter. Banks are expected to benefit as central banks around the world continue to hike interest rates following the path of the U.S. Federal Reserve to fight off inflation.

On the other hand, Chinese electric vehicle (EV) maker Xpeng was the biggest detractor during the quarter. While the Chinese EV industry continued to expand as expected, market competition has also increased as more companies entered the space. Xpeng is also in between model cycles, temporary slowing its sales growth. We expect the competition to increase in this space going forward and we are evaluating our approach and exposure in China’s electrics vehicles. China’s largest e-commerce platform Alibaba Group and leading Chinese e-commerce player JD.com also detracted during the quarter. Slowing topline growth mostly due to on-going zero-COVID policy hurt e-commerce companies in China. However, we are seeing positive profit growth and improving margin trends, positioning both companies well to recover once China moves on from its zero-COVID policy.

Notable Portfolio Changes:

During the third quarter, we reinitiated a position in India’s online food delivery platform Zomato given its current valuation. Zomato continues to be a leader in the food delivery vertical and its services are expanding beyond its primary first tier cities. We have also initiated a position in Samsung SDI, a South Korean battery and electronic materials manufacturer, to increase our exposure to the overall EV industry. Samsung SDI is one of the biggest players in the battery space, supplying units for many major automobile manufacturers. 

During the quarter we also exited a few positions including two Chinese stocks. We excited East Money Information, an online financial services platform company, as it is facing new regulations to cut fees in the industry. We also exited China Resources Mixc Lifestyle, a property management company, to reduce our exposure to China’s real estate market in general. 

Outlook:

Looking ahead, several challenges remain. The biggest challenge is the on-going zero-COVID policy in China which is likely to hurt market and consumer sentiment in China and hamper a recovery. Another big challenge in the markets is elevated inflation and the U.S. Fed’s aggressive monetary policy. That said, we believe that markets have priced in a substantial amount of uncertainty, especially within Asia and China, and not withstanding a sudden and severe downturn of global economic activity or a geopolitical shift, we believe there may be upside to come if we see some meaningful changes in China’s zero-COVID policy and a shift in monetary policy. The current valuation level in China reflects the level reached during the global financial crisis and we believe that the current valuation is very attractive.

We continue to find many innovative companies in Asia at appealing levels today and the current levels continue to provide fertile hunting ground for companies that are innovating in areas such as business strategy, products and services, marketing and human capital.

View the Fund’s Top 10 holdings as of September 30, 2022. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MATFX as of 09/30/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-35.43% 8.38% 5.40% 9.88% 4.15% 12/27/1999

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 1.09%

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. Investing in emerging and frontier markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. Sector funds may be subject to a higher degree of market risk than diversified funds because of a concentration in a specific sector. The Fund's value may be affected by changes in the science and technology-related industries.

 

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.