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Matthews Emerging Markets Small Companies Fund
MSMLX

The Matthews Emerging Markets Small Companies Fund (Institutional) received the 2023 Refinitiv Lipper Fund Award for Best Emerging Markets Fund over three years. Methodology.

Snapshot
  • Seeks alpha in innovative, capital efficient entrepreneurial companies in emerging markets
  • Focus on firms that have a strong competitive advantage through pricing power, distribution capability, and/or differentiated technologies and services
  • Bias toward businesses that cater to rising domestic consumer demand

09/15/2008

Inception Date

2.90%

YTD Return

(as of 05/20/2024)

$26.26

NAV

(as of 05/20/2024)

+0.01

1 Day NAV Change

(as of 05/20/2024)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Emerging Markets Small Companies 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 Small 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 defines Small Companies as companies with market capitalization no higher than the greater of US $5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI Emerging Markets Small Cap Index.

Risks

Investing in international and emerging markets may involve additional 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 securities involves greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.

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

Fund Facts
Inception Date 09/15/2008
Fund Assets $685.57 million (04/30/2024)
Currency USD
Ticker MSMLX
Cusip 577-125-206
Portfolio Turnover 26.9%
Benchmark MSCI Emerging Markets Small Cap Index
Geographic Focus 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.
Fees & Expenses
Gross Expense Ratio 1.34%
Net Expense Ratio 1.23%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 04/30/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Small Companies Fund - MSMLX
09/15/2008
MSMLX
0.04% 2.20% -0.08% 10.63% 4.61% 12.87% 7.72% 10.91%
MSCI Emerging Markets Small Cap Index
2.02% 4.95% 3.15% 22.69% 3.40% 9.39% 5.65% 7.29%
As of 03/31/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Small Companies Fund - MSMLX
09/15/2008
MSMLX
-2.78% -0.12% -0.12% 13.50% 6.62% 13.38% 7.66% 10.97%
MSCI Emerging Markets Small Cap Index
0.11% 1.11% 1.11% 21.10% 4.75% 9.01% 5.48% 7.19%
For the years ended December 31st
Name 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
Matthews Emerging Markets Small Companies Fund - MSMLX
MSMLX
19.88% -16.84% 22.14% 43.68% 17.38% -18.05% 30.59% -1.44% -9.43% 11.39%
MSCI Emerging Markets Small Cap Index
24.49% -17.54% 19.29% 19.72% 11.93% -18.30% 34.22% 2.56% -6.57% 1.34%

Before April 30, 2021, the Fund was managed with a materially different investment strategy and may have achieved materially different performance results under its current investment strategy from the performance shown for periods before that date.

MSCI Emerging Markets Small Cap Index since inception value calculated from 9/15/08.

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 03/31/2024)

MSCI AC Asia ex Japan Small Cap Index since inception value calculated from 9/15/08.

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
  • 5 YEAR
  • out of 657 funds
  • 10 YEAR
  • out of 425 funds
  • 1 YEAR
  • 2nd
  • 203 out of 779 funds
  • 3 YEAR
  • 1st
  • 10 out of 688 funds
  • 5 YEAR
  • 1st
  • 3 out of 625 funds
  • 10 YEAR
  • 1st
  • 2 out of 401 funds
  • SINCE INCEPTION
  • 1st
  • 1 out of 204 funds

Best Emerging Markets Fund Over 3 Years

MISMX honored with 2023 Refinitiv Lipper Fund Award.

Methodology

Ratings agency calculation methodology

Portfolio Managers

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Jeremy  Sutch, CFA photo
Jeremy Sutch, CFA

Co-Manager

Alex  Zarechnak photo
Alex Zarechnak

Co-Manager

Hardy  Zhu photo
Hardy Zhu

Co-Manager

Portfolio Characteristics

(as of 03/31/2024)
Fund Benchmark
Number of Positions 79 2,053
Weighted Average Market Cap $4.3 billion $2.0 billion
Active Share 98.1 n.a.
P/E using FY1 estimates 15.6x 13.6x
P/E using FY2 estimates 13.0x 11.7x
Price/Cash Flow 9.3 8.1
Price/Book 2.1 1.6
Return On Equity 11.5 12.8
EPS Growth (3 Yr) 24.3% 21.4%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 03/31/2024)
2.23%
Alpha
0.97
Beta
98.86%
Upside Capture
91.17%
Downside Capture
0.22
Sharpe Ratio
0.19
Information Ratio
9.59%
Tracking Error
71.35

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 04/30/2024)
Name Sector Country % Net Assets
Shriram Finance, Ltd. Financials India 6.6
Bandhan Bank, Ltd. Financials India 5.1
Full Truck Alliance Co., Ltd. Industrials China/Hong Kong 4.0
Hugel, Inc. Health Care South Korea 3.5
Phoenix Mills, Ltd. Real Estate India 3.3
Saudi Tadawul Group Holding Co. Financials Saudi Arabia 2.9
Airtac International Group Industrials China/Hong Kong 2.7
Legend Biotech Corp. Health Care China/Hong Kong 2.6
Flat Glass Group Co., Ltd. Information Technology China/Hong Kong 2.5
Eugene Technology Co., Ltd. Information Technology South Korea 2.4
TOTAL 35.6

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
Industrials 21.7 17.8 3.9
Information Technology 20.4 18.1 2.3
Financials 19.0 10.6 8.4
Consumer Discretionary 18.7 11.5 7.2
Health Care 9.8 9.2 0.6
Real Estate 5.4 6.0 -0.6
Materials 2.7 11.6 -8.9
Communication Services 1.6 3.8 -2.2
Consumer Staples 1.5 6.2 -4.7
Utilities 0.5 3.1 -2.6
Energy 0.0 2.0 -2.0
Liabilities in Excess of Cash and Other Assets -1.2 0.0 -1.2

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 25.9 8.2 17.7
India 22.4 25.1 -2.7
Taiwan 12.7 22.8 -10.1
Brazil 9.9 4.8 5.1
South Korea 8.3 13.6 -5.3
Vietnam 5.0 0.0 5.0
Chile 4.1 0.8 3.3
Saudi Arabia 3.9 4.1 -0.2
Philippines 2.6 0.8 1.8
Poland 1.6 1.3 0.3
Indonesia 1.2 1.7 -0.5
Turkey 1.1 2.4 -1.3
South Africa 0.9 3.1 -2.2
Thailand 0.9 3.0 -2.1
Bangladesh 0.4 0.0 0.4
Mexico 0.1 2.1 -2.0
Malaysia 0.0 2.4 -2.4
Kuwait 0.0 1.1 -1.1
United Arab Emirates 0.0 1.0 -1.0
Qatar 0.0 0.7 -0.7
Greece 0.0 0.6 -0.6
Egypt 0.0 0.3 -0.3
Hungary 0.0 0.1 -0.1
Peru 0.0 0.1 -0.1
Liabilities in Excess of Cash and Other Assets -1.2 0.0 -1.2

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 0.0 0.0 0.0
Large Cap ($10B-$25B) 11.9 0.1 11.8
Mid Cap ($3B-$10B) 38.8 18.3 20.5
Small Cap (under $3B) 50.5 81.6 -31.1
Liabilities in Excess of Cash and Other Assets -1.2 0.0 -1.2

The Portfolio’s market cap exposure breakdown presented is used for comparison purposes and the definition of the capitalization breakdown is from MSCI.

The Fund defines Small Companies as companies with market capitalization no higher than the greater of US$5 billion or the market capitalization of the largest company included in the Fund's primary benchmark, the MSCI Emerging Markets Small Cap Index.

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)
12/13/2023 12/14/2023 $0.40545 $0.00000 $1.72886 $2.13431 7.9% N.A.
12/13/2022 12/14/2022 $0.08965 $0.14027 $1.62616 $1.85608 7.3% N.A.
12/14/2021 12/15/2021 $0.00000 $1.52123 $0.22299 $1.74422 5.5% N.A.
12/15/2020 12/16/2020 $0.05487 $0.00000 $0.01710 $0.07197 0.3% N.A.
12/16/2019 12/17/2019 $0.09231 $0.00000 $0.00000 $0.09231 0.5% 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. 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. 

Contributors and Detractors

  • For the quarter ended March 31, 2024, the Emerging Markets Small Companies Fund returned -0.12%, (Investor Class) and -0.08% (Institutional Class) while its benchmark, the MSCI Emerging Markets Small Cap Index, returned 1.11% over the same period.
  • The top three contributors to relative performance, on a country basis, were Vietnam due to an off-benchmark allocation, South Korea due to stock selection and Thailand due to an underweight allocation. The top three detractors to relative performance were China/Hong Kong due to an overweight allocation, and Brazil and India due to stock selection.
  • The top three contributors to relative performance, on a sector basis, were materials due to an underweight allocation, and financials and information technology (IT) due to stock selection. The top three detractors to relative performance were industrials, consumer discretionary and communication services due to stock selection.
  • The largest contributors to absolute performance during the quarter included Saudi Tadawul Group Holding, a Saudi Arabian-based stock exchange operator, Shriram Finance, an Indian non-banking financial services provider, and Flat Glass, a Chinese manufacturer of solar glass. The top three detractors to performance included Bandhan Bank, an Indian commercial bank, Silergy, a Taiwanese manufacturer of power management integrated circuits (IC) that derives majority of its sales from China, and YDUQS Participacoes, a Brazilian on-campus and distance-learning education 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.
  • We believe small companies in emerging markets offer long-term growth opportunities given their innovation and domestic consumption orientation while also being less exposed to regulatory and geo-political risks. We continue to find quality businesses at attractive valuations in this asset class.

 

View the Fund’s Top 10 holdings as of March 31, 2024. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MSMLX as of 03/31/2024
1YR 3YR 5YR 10YR Since Inception Inception Date
13.50% 6.62% 13.38% 7.66% 10.97% 09/15/2008

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 1.34%
Net Expense Ratio 1.23%

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.

Investing in international and emerging markets may involve additional 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 securities involves greater risks, as these countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. The Fund is non-diversified as it concentrates its investments in small sized companies. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies.

 

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.