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Matthews Emerging Markets Equity Fund
MEGMX

Snapshot
  • Seeks Alpha in Global Emerging Markets—capitalizes on consumption and innovation trends
  • Quality Growth Portfolio—based on deep, holistic analysis
  • All-Cap, Company-First Approach—emphasizes fundamental research over top-down country or sector allocation

04/30/2020

Inception Date

7.59%

YTD Return

(as of 06/18/2024)

$12.76

NAV

(as of 06/18/2024)

+0.07

1 Day NAV Change

(as of 06/18/2024)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Emerging Markets Equity 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 emerging market countries. Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe. Certain emerging market countries may also be classified as “frontier” market countries, which are a subset of emerging market countries with newer or even less developed economies and markets, such as Sri Lanka and Vietnam. The list of emerging market countries and frontier market countries may change from time to time. The Fund may also invest in companies located in developed countries; however, the Fund may not invest in any company located in a developed country if, at the time of purchase, more than 20% of the Fund’s assets are invested in developed market companies.

Risks

Investments in emerging and frontier securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier markets countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets.

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

Fund Facts
Inception Date 04/30/2020
Fund Assets $20.79 million (05/31/2024)
Currency USD
Ticker MEGMX
Cusip 577-130-651
Portfolio Turnover 26.4%
Benchmark MSCI Emerging Markets Index
Geographic Focus Emerging Markets - Countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe
Fees & Expenses
Gross Expense Ratio 1.70%
Net Expense Ratio 1.12%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 05/31/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Equity Fund - MEGMX
04/30/2020
MEGMX
0.90% 3.69% 4.30% 11.59% -5.94% n.a. n.a. 9.20%
MSCI Emerging Markets Index
0.59% 3.61% 3.53% 12.85% -5.85% n.a. n.a. 6.11%
As of 03/31/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Equity Fund - MEGMX
04/30/2020
MEGMX
3.52% 4.13% 4.13% 9.18% -4.39% n.a. n.a. 9.57%
MSCI Emerging Markets Index
2.52% 2.44% 2.44% 8.59% -4.68% n.a. n.a. 6.09%
For the years ended December 31st
Name 2023 2022 2021
Matthews Emerging Markets Equity Fund - MEGMX
MEGMX
8.43% -20.94% -0.60%
MSCI Emerging Markets Index
10.27% -19.74% -2.22%

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

Year to Date and Since Inception performance with less than one year of history represents actual performance, not annualized.

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 03/31/2024)

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 721 funds
  • 3 YEAR
  • out of 721 funds
  • 1 YEAR
  • 2nd
  • 383 out of 779 funds
  • 3 YEAR
  • 2nd
  • 275 out of 688 funds
  • SINCE INCEPTION
  • 1st
  • 129 out of 660 funds

Ratings agency calculation methodology

Portfolio Managers

Sean  Taylor photo
Sean Taylor

Lead Manager

Alex  Zarechnak photo
Alex Zarechnak

Lead Manager

Andrew  Mattock, CFA photo
Andrew Mattock, CFA

Co-Manager

Peeyush  Mittal, CFA photo
Peeyush Mittal, CFA

Co-Manager

Jeremy  Sutch, CFA photo
Jeremy Sutch, CFA

Co-Manager

Portfolio Characteristics

(as of 03/31/2024)
Fund Benchmark
Number of Positions 59 1,376
Weighted Average Market Cap $150.9 billion $128.9 billion
Active Share 78.2 n.a.
P/E using FY1 estimates 14.2x 12.5x
P/E using FY2 estimates 12.0x 11.1x
Price/Cash Flow 10.5 7.7
Price/Book 2.5 1.7
Return On Equity 19.7 15.4
EPS Growth (3 Yr) 23.6% 17.9%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 05/31/2024)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 9.7
Tencent Holdings, Ltd. Communication Services China/Hong Kong 5.4
Samsung Electronics Co., Ltd. Information Technology South Korea 3.3
HDFC Bank, Ltd. Financials India 2.4
ICICI Bank, Ltd. Financials India 2.2
Trip.com Group, Ltd. Consumer Discretionary China/Hong Kong 2.1
FPT Corp. Information Technology Vietnam 2.0
Reliance Industries, Ltd. Energy India 2.0
Contemporary Amperex Technology Co., Ltd. Industrials China/Hong Kong 1.9
Meituan Class B Consumer Discretionary China/Hong Kong 1.9
TOTAL 32.9

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 03/31/2024)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 22.7 23.7 -1.0
Financials 21.8 22.4 -0.6
Consumer Discretionary 18.7 12.4 6.3
Materials 8.4 7.2 1.2
Consumer Staples 5.1 5.6 -0.5
Communication Services 4.6 8.6 -4.0
Energy 4.0 5.3 -1.3
Industrials 2.9 7.0 -4.1
Real Estate 2.1 1.5 0.6
Health Care 1.4 3.5 -2.1
Utilities 0.0 2.8 -2.8
Cash and Other Assets, Less Liabilities 8.1 0.0 8.1

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 22.7 25.2 -2.5
India 11.6 17.7 -6.1
Taiwan 10.3 17.5 -7.2
South Korea 9.4 12.8 -3.4
Brazil 6.8 5.2 1.6
Mexico 5.9 2.7 3.2
Vietnam 5.8 0.0 5.8
United States 5.1 0.0 5.1
France 2.6 0.0 2.6
Indonesia 2.3 1.9 0.4
Kazakhstan 2.1 0.0 2.1
United Arab Emirates 2.0 1.2 0.8
Poland 1.7 1.0 0.7
Philippines 1.4 0.6 0.8
Saudi Arabia 1.2 4.2 -3.0
Peru 1.2 0.3 0.9
South Africa 0.0 2.8 -2.8
Thailand 0.0 1.5 -1.5
Malaysia 0.0 1.4 -1.4
Kuwait 0.0 0.8 -0.8
Qatar 0.0 0.8 -0.8
Turkey 0.0 0.7 -0.7
Chile 0.0 0.5 -0.5
Greece 0.0 0.5 -0.5
Hungary 0.0 0.2 -0.2
Colombia 0.0 0.1 -0.1
Czech Republic 0.0 0.1 -0.1
Egypt 0.0 0.1 -0.1
Cash and Other Assets, Less Liabilities 8.1 0.0 8.1

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 59.3 56.3 3.0
Large Cap ($10B-$25B) 13.6 22.0 -8.4
Mid Cap ($3B-$10B) 16.7 20.6 -3.9
Small Cap (under $3B) 2.2 1.0 1.2
Cash and Other Assets, Less Liabilities 8.1 0.0 8.1

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.

Risk Metrics (3 Yr Return)

(as of 03/31/2024)
0.01%
Alpha
0.94
Beta
99.47%
Upside Capture
98.85%
Downside Capture
-0.40
Sharpe Ratio
0.05
Information Ratio
6.31%
Tracking Error
87.90

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

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)
12/13/2023 12/14/2023 $0.21539 $0.00000 $0.00000 $0.21539 1.8% N.A.
12/13/2022 12/14/2022 $0.20142 $0.00000 $0.00000 $0.20142 1.7% N.A.
12/14/2021 12/15/2021 $0.18047 $0.68627 $0.43302 $1.29976 8.5% N.A.
12/15/2020 12/16/2020 $0.00000 $0.35583 $0.00000 $0.35583 2.3% N.A.

 

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, 2024

Market Environment

  • The first quarter of the year was a period of contrast across emerging markets. In particular, markets linked to technology, communication services and the global supply chains of semiconductors and artificial intelligence (AI) benefited while other interest-rate sensitive areas were held back by a reset in expectations as to the trajectory of U.S. Federal Reserve cuts. 
  • In terms of currencies, they were moderately weaker against a backdrop of “higher-for-longer” U.S. interest rates, but commodities were broadly higher which tends to be supportive of many cyclical exporters in emerging markets. 
  • By region, India outperformed the broad emerging markets, though there was some consolidation over concerns regarding elevated valuations. South Korea was aided by its exposure to global trade while Taiwan gained amid demand for AI-related hardware. China on the other hand had a poor start, weighed down by weak economic growth and broad-based concerns including the lack of large-scale policy support for its real estate sector and slow recovery in consumer demand.
  • Key markets of Latin America were challenged as it became clear that global interest rates would stay higher for longer. While Brazil and Mexico were ahead of the curve in raising interest rates to combat inflation, their economies are now contending with prolonged and elevated interest rates which will likely be cut in lockstep with the measured strategy of the U.S. Fed. In Brazil, markets reacted to signals that President Lula could curb the independence of Petrobras and Vale, two of the largest stocks in the index.  

Contributors and Detractors

  • For the quarter ended March 31, 2024, the Emerging Markets Equity Fund returned 4.13%, (Investor Class) and 4.14% (Institutional Class) while its benchmark, the MSCI Emerging Markets Index, returned 2.44% over the same period.
  • The top three contributors to relative performance, on a country basis, were China/Hong Kong due to stock selection, and Vietnam and Kazakhstan due to off-benchmark allocations. The top three detractors to relative performance were India, Poland and the Philippines due to stock selection.
  • The top three contributors to relative performance, on a sector basis, were consumer discretionary, information technology (IT) and financials due to stock selection. The top three detractors to relative performance were industrials and energy due to stock selection and real estate due to an overweight allocation.
  • The largest contributors to absolute performance during the quarter included Taiwan Semiconductor Manufacturing Company, a leading Taiwanese chip manufacturer, Meituan, China’s largest food delivery service and internet platform company, and Applied Materials, a U.S. semiconductor equipment manufacturer. The top three detractors to performance included HDFC Bank, an leading Indian bank and financial services provider, Prologis Property Mexico, a Mexican real estate developer, and Globant, an Argentinian IT and software development company.

Outlook

  • Greater clarity in the global macro environment may cause market volatility to dampen in the coming months. As we look out to the rest of the year, we see three reasons to be positive on emerging markets. The first is the natural recovery that is taking hold after COVID. Economic growth is picking up across emerging markets and is being driven by domestic consumption. Secondly, when interest rates are cut in the U.S., many emerging markets will in turn be able to cut and so we should get a cyclical pickup. Thirdly, we expect the second half of the year to yield slightly better news for China. We think earnings will continue to improve and there will be more initiatives to support the consumer.
  • Looking across regions, countries and sectors, valuations are elevated in many areas warranting an active approach to seek out relative value in an effort to minimize risk wherever possible in our view.

 

Top 10 holdings as of March 31, 2024. Current and future holdings are subject to change and risk.

 

Average Annual Total Returns - MEGMX as of 03/31/2024
1YR 3YR 5YR 10YR Since Inception Inception Date
9.18% -4.39% N.A. N.A. 9.57% 04/30/2020

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. For the Fund's most recent month-end performance visit matthewsasia.com

Fees & Expenses
Gross Expense Ratio 1.70%
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, 2025. Please see the Fund’s prospectus for additional details.

Investments in emerging and frontier securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier markets 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.