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Matthews India Fund
MINDX

Snapshot
  • Unconstrained all-cap strategy focused on companies with a sustainable competitive edge and pricing power, which are able to perform throughout economic cycles
  • Fundamental bottom-up approach to seek well-run entrepreneurial companies with sustainable organic growth and trustworthy managements
  • Bias toward businesses that cater to rising domestic consumer demand and to policy-independent sectors

10/31/2005

Inception Date

13.49%

YTD Return

(as of 09/22/2023)

$25.07

NAV

(as of 09/22/2023)

+0.10

1 Day NAV Change

(as of 09/22/2023)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews India Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in publicly traded common stocks, preferred stocks and convertible securities of companies located in India. 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 markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.

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

Fund Facts
Inception Date 10/31/2005
Fund Assets $676.53 million (08/31/2023)
Currency USD
Ticker MINDX
Cusip 577-130-859
Portfolio Turnover 41.4%
Benchmark S&P Bombay Stock Exchange 100 Index MSCI India Index
Geographic Focus India
Fees & Expenses
Gross Expense Ratio 1.15%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 08/31/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews India Fund - MINDX
10/31/2005
MINDX
-0.24% 7.25% 13.13% 9.53% 14.57% 4.95% 13.31% 9.96%
S&P Bombay Stock Exchange 100 Index
-2.23% 5.11% 8.51% 5.91% 16.72% 8.52% 12.84% 10.24%
MSCI India Index
-1.85% 5.92% 6.47% 1.82% 15.01% 7.71% 10.70% 9.15%
As of 06/30/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews India Fund - MINDX
10/31/2005
MINDX
5.75% 13.13% 11.54% 17.99% 19.68% 5.31% 11.03% 9.97%
S&P Bombay Stock Exchange 100 Index
4.54% 11.94% 7.93% 19.23% 21.74% 9.69% 10.88% 10.31%
MSCI India Index
4.75% 12.36% 5.30% 14.72% 19.84% 9.04% 9.02% 9.17%
For the years ended December 31st
Name 2022 2021 2020 2019 2018 2017 2016 2015 2014 2013
Matthews India Fund - MINDX
MINDX
-9.92% 18.11% 16.45% -0.88% -10.09% 35.79% -1.23% 0.90% 63.71% -5.90%
S&P Bombay Stock Exchange 100 Index
-4.53% 24.08% 13.92% 8.53% -6.00% 41.88% 2.32% -6.41% 31.40% -4.70%

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

MSCI and MICM are the sources of MSCI India Index performance data.

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 06/30/2023)

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 22 funds
  • 3 YEAR
  • out of 22 funds
  • 5 YEAR
  • out of 20 funds
  • 10 YEAR
  • out of 17 funds
  • 1 YEAR
  • 1st
  • 6 out of 23 funds
  • 3 YEAR
  • 1st
  • 5 out of 22 funds
  • 5 YEAR
  • 4th
  • 19 out of 20 funds
  • 10 YEAR
  • 2nd
  • 6 out of 17 funds
  • SINCE INCEPTION
  • 2nd
  • 1 out of 2 funds

Ratings agency calculation methodology

Portfolio Managers

Peeyush  Mittal, CFA photo
Peeyush Mittal, CFA

Lead Manager

Sharat  Shroff, CFA photo
Sharat Shroff, CFA

Co-Manager

Portfolio Characteristics

(as of 06/30/2023)
Fund Benchmark
Number of Positions 50 101
Weighted Average Market Cap $43.8 billion $63.6 billion
Active Share 53.4 n.a.
P/E using FY1 estimates 22.6x 20.9x
P/E using FY2 estimates 19.2x 18.2x
Price/Cash Flow n.a. 15.6
Price/Book 4.2 3.5
Return On Equity 20.8 19.1
EPS Growth (3 Yr) 19.1% 20.1%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 06/30/2023)
0.71%
Alpha
0.87
Beta
81.02%
Upside Capture
79.32%
Downside Capture
1.20
Sharpe Ratio
-0.40
Information Ratio
5.22%
Tracking Error
90.55

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 08/31/2023)
Name Sector % Net Assets
HDFC Bank, Ltd. Financials 6.3
Shriram Finance, Ltd. Financials 6.0
ICICI Bank, Ltd. Financials 5.8
Reliance Industries, Ltd. Energy 4.9
Infosys, Ltd. Information Technology 4.7
Neuland Laboratories, Ltd. Health Care 3.6
Tata Consultancy Services, Ltd. Information Technology 3.4
Axis Bank, Ltd. Financials 3.3
IndusInd Bank, Ltd. Financials 3.1
Hindustan Unilever, Ltd. Consumer Staples 3.1
TOTAL 44.2

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 06/30/2023)
  • Sector Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Financials 37.6 34.9 2.7
Consumer Discretionary 12.9 8.5 4.4
Information Technology 11.9 11.7 0.2
Health Care 10.2 3.9 6.3
Consumer Staples 9.2 10.8 -1.6
Materials 7.0 7.8 -0.8
Industrials 6.5 6.2 0.3
Energy 4.5 10.6 -6.1
Communication Services 0.0 2.7 -2.7
Utilities 0.0 2.6 -2.6
Real Estate 0.0 0.3 -0.3
Cash and Other Assets, Less Liabilities 0.2 0.0 0.2

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 47.9 69.5 -21.6
Large Cap ($10B-$25B) 13.0 19.1 -6.1
Mid Cap ($3B-$10B) 26.6 11.1 15.5
Small Cap (under $3B) 12.4 0.3 12.1
Cash and Other Assets, Less Liabilities 0.2 0.0 0.2

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)
12/13/2022 12/14/2022 $0.00000 $0.02887 $3.35147 $3.38034 13.0% 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, 2023

For the first half of 2023, the Matthews India Fund returned 11.54% (Investor Class) and 11.67% (Institutional Class), while its benchmark, the S&P Bombay Stock Exchange 100 Index, returned 7.93% over the same period. For the quarter ending June 30, 2023, the Fund returned 13.13% (Investor Class) and 13.17% (Institutional Class), while the benchmark returned 11.94%.

Market Environment:

Indian markets performed well in the first half of 2023 on the back of strong net equity flows from domestic and foreign portfolio investments (FPI). Foreign inflows are approaching US15 billion this year which isn’t far short of the total negative FPI outflow of 2022.

The turnaround in FPI has occurred amid the general consensus that global monetary tightening has either peaked or will be peaking soon. The Reserve Bank of India has held interest rates unchanged since April likely indicating an end to its rate hikes. The moderation in inflation data in the U.S. and India supports this view. In India, wholesale producer price inflation has turned negative and consumer price inflation (CPI) has trended within the RBI’s target zone of 2%-6% in last three months.

Despite what are elevated interest rates, India’s economy has continued to perform well. The 6.1% gross domestic product (GDP) growth reported for the first quarter exceeded consensus expectations of 5%. Expansion was largely led by government and private capital spending as consumption growth continued to be muted. Gross fixed capital formation delivered growth of 8.9% in the period while infrastructure development, along with revival in commercial and residential real estate, is driving a surge in construction activity in the country.

Performance Contributors and Detractors:

At the sector level, strong stock selection in financials was the biggest contributor to relative performance in the first half. Our overweight and stock selection in health care and stock selection in materials and industrials were also positive contributors, as was our underweight to energy. On the flip side, stock selection in consumer staples was the biggest detractor. Selection in consumer discretionary also hurt relative performance, mitigated by our overweight position. Lack of exposure to utilities also detracted.

At the holdings level, the two biggest contributors to relative and absolute performance were Shriram Finance and Neuland Laboratories. Shriram Finance, an auto and consumer finance services provider, gained as the outlook for margins for non-banking financial companies continued to improve with the bulk of interest rate-hikes likely behind us. In the second quarter, long-standing issues related to stock ownership were also addressed which also helped drive stock performance. Neuland Laboratories continues to shift focus away from generic active pharmaceutical ingredients (API) manufacturing to working more closely with innovator pharma companies. This is not only helping the company grow predictably but also expand margins, in our view.

In contrast, Restaurant Brands Asia (RBA), a fast-food chain, was among the biggest detractors. RBA has continued to grow well on back of footprint expansion by opening more locations across the country, however its per-store-unit economics remain muted compared to peers as the company seems to be struggling to drive higher traffic through the same outlets.

Notable Portfolio Changes:

We continued to shift the portfolio toward fast-growing business segments and away from end markets where we think competition seems to be ramping up. We exited Pidilite Industries, an adhesives manufacturing company, as growth has slowed down over the years and incremental return on capital is consistently going down. In our view, increasing competitive intensity will likely continue to negatively impact financial performance while the stock has continued to trade at a very lofty valuation.

Similarly we exited engineering company Greaves Cotton. While Greaves Cotton is operating in the electric vehicle (EV) space, an industry that will grow leaps and bounds in India, from its recent capital allocations, we believe the company is not taking the strategic steps it needs to make in order to be successful.

We initiated a new investment in Mahindra & Mahindra Financial Services. Following the turnaround of its flagship auto business, Mahindra & Mahindra seems to be taking the right steps to rejuvenate performance of its non-banking financial business. It has injected new talent and is addressing segments of the market where credit quality issues are less adverse and more predictable. We think the company will not just grow fast but also trade at a better valuation in the future compared to where it has been historically.

Outlook:

Given the strong run in Indian equities in last few months it is time to be cautious and allow markets to consolidate for some time to come. Valuations have again gotten stretched and equity risk premium has dropped, indicating risk-reward is turning adverse from a near-term perspective. Indian equity markets at current valuations are also not discounting the risks that the economy faces in coming quarters. Among those is the risk to political stability. India is going to have general elections early next year and to assume that Prime Minister Narendra Modi will retain power would be foolhardy. We have seen how opposition parties are planning to present a united front against Modi and hence, we believe, the outcome of the election isn’t a forgone conclusion. India’s economy also depends on export-oriented growth and the slowdown in the developed world we think is going to have a negative impact. We also believe a steep commodity price-correction is likely and this, together with the elections, may inject caution and delays into decision-making as it relates to gross capital formation in the private sector.

 

Top 10 holdings as of June 30, 2023. Current and future holdings are subject to change and risk.

Equity risk premium: the excess return that investing in the stock market provides over a risk-free rate.

 

Average Annual Total Returns - MINDX as of 06/30/2023
1YR 3YR 5YR 10YR Since Inception Inception Date
17.99% 19.68% 5.31% 11.03% 9.97% 10/31/2005

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%

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 markets involves different and greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. In addition, investments in a single-country fund, which is considered a non-diversified fund, may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.

 

Visit our Glossary of Terms page for definitions and additional information.

Index Definitions

The Benchmark used for comparison under "Portfolio Breakdown" and "Portfolio Characteristics" is the S&P Bombay Stock Exchange 100 index.

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.