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Matthews Emerging Markets Sustainable Future Fund
MASGX

Formerly known as the Matthews Asia ESG Fund.

Snapshot
  • Unconstrained strategy focused on companies that make a positive environmental, social and economic impact in emerging markets
  • All-cap portfolio with diversified emerging and frontier market exposures
  • Deep bottom-up fundamental approach that seeks to generate attractive long-term risk-adjusted returns by investing in well-governed companies

04/30/2015

Inception Date

-22.06%

YTD Return

(as of 09/28/2022)

$11.98

NAV

(as of 09/28/2022)

-0.02

1 Day NAV Change

(as of 09/28/2022)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Emerging Markets Sustainable Future 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 of any market capitalization located in emerging market countries that satisfy one or more of the Fund’s environmental, social and governance (“ESG”) standards. 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.

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. Matthews Emerging Markets Sustainable Future Fund’s consideration of ESG factors in making its investment decisions may impact the Fund’s relative investment performance positively or negatively.

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

Fund Facts
Inception Date 04/30/2015
Fund Assets $142.27 million (08/31/2022)
Currency USD
Ticker MASGX
Cusip 577-130-727
Portfolio Turnover 65.6%
Benchmark MSCI Emerging Markets Index MSCI All Country Asia ex Japan 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 1.35%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 08/31/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Sustainable Future Fund - MASGX
04/30/2015
MASGX
-1.33% -0.89% -13.27% -14.72% 13.64% 8.85% n.a. 7.67%
MSCI Emerging Markets Index
0.46% -6.29% -17.23% -21.48% 3.10% 0.96% n.a. 2.13%
MSCI All Country Asia ex Japan Index
0.02% -5.46% -17.07% -21.45% 4.15% 1.80% n.a. 2.86%
As of 06/30/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Sustainable Future Fund - MASGX
04/30/2015
MASGX
0.67% 0.74% -11.91% -13.98% 13.03% 9.91% n.a. 8.10%
MSCI All Country Asia ex Japan Index
-4.40% -8.90% -16.14% -24.78% 2.41% 3.39% n.a. 3.09%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016
Matthews Emerging Markets Sustainable Future Fund - MASGX
MASGX
11.76% 42.87% 12.55% -9.73% 33.79% -1.40%
MSCI All Country Asia ex Japan Index
-4.46% 25.36% 18.52% -14.12% 42.08% 5.76%

Before July 29, 2022, the Fund was managed with a slightly different investment strategy and may have achieved different performance results under its current investment strategy from the performance shown for periods before that date.

Effective July 29, 2022, in connection with changes to the Fund’s name and principal investment strategies, the primary benchmark changed from the MSCI All Country Asia ex Japan Index to the MSCI Emerging Markets Index.

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 06/30/2022)

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

  • 1 YEAR
  • 1st
  • 6 out of 25 funds
  • 3 YEAR
  • 1st
  • 2 out of 25 funds
  • 5 YEAR
  • 1st
  • 2 out of 23 funds
  • SINCE INCEPTION
  • 1st
  • 2 out of 23 funds

Ratings agency calculation methodology

Portfolio Managers

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Portfolio Characteristics

(as of 06/30/2022)
Fund Benchmark
Number of Positions 53 1,201
Weighted Average Market Cap $24.3 billion $110.6 billion
Active Share 94.9 n.a.
P/E using FY1 estimates 17.3x 11.6x
P/E using FY2 estimates 13.1x 10.7x
Price/Cash Flow 13.1 7.1
Price/Book 2.4 1.6
Return On Equity 2.5 14.5
EPS Growth (3 Yr) 4.9% 11.2%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 06/30/2022)
11.10%
Alpha
1.08
Beta
119.04%
Upside Capture
75.87%
Downside Capture
0.58
Sharpe Ratio
0.93
Information Ratio
11.46%
Tracking Error
71.56

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 08/31/2022)
Name Sector Country % Net Assets
Full Truck Alliance Co., Ltd. Industrials China/Hong Kong 5.8
Shriram City Union Finance, Ltd. Financials India 5.6
Legend Biotech Corp. Health Care United States 5.5
Bandhan Bank, Ltd. Financials India 4.9
Hong Kong Exchanges & Clearing, Ltd. Financials China/Hong Kong 4.9
Samsung SDI Co., Ltd., Pfd. Information Technology South Korea 4.9
JD Health International, Inc. Consumer Discretionary China/Hong Kong 4.4
Phoenix Mills, Ltd. Real Estate India 4.1
Contemporary Amperex Technology Co., Ltd. Industrials China/Hong Kong 3.2
Ginlong Technologies Co., Ltd. Industrials China/Hong Kong 3.1
TOTAL 46.4

Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.

Presentation PDF Matthews Emerging Markets Sustainable Future Fund Composition as of August 31, 2022

Portfolio Breakdown (%)

(as of 06/30/2022)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Industrials 28.9 6.6 22.3
Financials 20.4 20.4 0.0
Consumer Discretionary 14.3 15.8 -1.5
Information Technology 13.2 21.4 -8.2
Health Care 11.4 4.0 7.4
Real Estate 6.6 4.1 2.5
Communication Services 2.5 10.4 -7.9
Consumer Staples 1.2 5.3 -4.1
Materials 0.0 5.2 -5.2
Energy 0.0 3.7 -3.7
Utilities 0.0 3.1 -3.1
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

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 44.6 47.3 -2.7
India 23.2 14.2 9.0
South Korea 11.3 12.5 -1.2
United States 8.5 0.0 8.5
Taiwan 4.5 16.0 -11.5
Indonesia 3.2 2.0 1.2
Bangladesh 1.8 0.0 1.8
Vietnam 0.9 0.0 0.9
Singapore 0.4 3.4 -3.0
Thailand 0.0 2.1 -2.1
Malaysia 0.0 1.6 -1.6
Philippines 0.0 0.8 -0.8
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 21.7 58.6 -36.9
Large Cap ($10B-$25B) 21.2 21.1 0.1
Mid Cap ($3B-$10B) 28.8 18.5 10.3
Small Cap (under $3B) 26.7 1.7 25.0
Cash and Other Assets, Less Liabilities 1.6 0.0 1.6

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.

Portfolio Breakdown benchmark reflects the MSCI All Country Asia ex Japan Index as of 6/30/22.

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 $0.70374 $0.64204 $1.34578 7.8% 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, 2022

For the first half of 2022, the Matthews Asia ESG Fund returned -11.91% (Investor Class) and -11.77% (Institutional Class), while its benchmark, the MSCI All Country Asia ex Japan Index, returned -16.14% over the same period. For the quarter ending June 30, 2022, the Fund returned 0.74% (Investor Class) and 0.89% (Institutional Class), while the benchmark returned -8.90%.

Market Environment:

The continually higher-than-expected inflation reads both in the U.S. and European Union have led the market to increasingly expect a steeper rate-hike cycle. The U.S. Federal Reserve hiked its rate by 75 basis points (0.75%) at its June meeting, the first such move in almost three decades. Also attendant was the view that this steeper pace of tightening may lead to a recession down the road. With no end in sight for the Russian invasion of Ukraine, the prices in the oil and gas markets remain elevated notwithstanding periodic pullbacks predicated on worries of recession.

That said, in China, after several quarters, sentiment has turned a corner with an expectation that the regulatory risk has peaked and the Chinese government is taking a more pragmatic approach to implementing its zero COVID policy and aiding economic activity through a stimulus package.

Indonesia was the strongest performing market in the first six months and the only major market to deliver positive returns, while South Korea and Taiwan were the worst performing markets. In the second quarter, China/Hong Kong was the top performer and South Korea and Taiwan were again the bottom performers.

Asian currencies weakened against a surging U.S. dollar during the second quarter but have held up relatively well compared to other developed market currencies. The South Korean won depreciated the most followed by the Thai baht, while the Singapore dollar and the Indonesian rupiah did relatively better.

Performance Contributors and Detractors:

On a country basis, China, India and South Korea were major contributors to relative performance during the first half of 2022 primarily driven by stock selection. On the other hand, our underweight and stock selection within Taiwan and stock selection within Indonesia detracted from relative performance.

From a sector perspective, good stock selection in industrials and health care were the biggest drivers of relative performance, while poor stock selection in information technology and financials detracted performance.

Turning to individual holdings, Full Truck Alliance was a top contributor to the Fund’s relative performance in the first half of the year. The company is a leading digital-freight platform in China and the world connecting shippers with truckers online, enabling faster, more efficient order listing and matching and creating broader access while at the same time lowering shipping costs and carbon emissions by reducing empty miles. During the period, a key part of the Cyberspace Administration of China (CAC) cybersecurity review that started in July 2021, during which time Full Truck was not allowed to register new users, was resolved. The company was again allowed to register new users thereby lifting a major overhang on stock price performance. We continue to take a constructive view of Full Truck’s market positioning, growth prospects, social and environmental value-add.

On the other hand, semiconductor companies Andes Technology and Micron Technology were among the top detractors to relative performance due to rotation away from companies that derive a significant part of their value from long-term growth amid a sharply rising interest rate environment and near-term concerns about memory demand outlook, respectively.

Notable Portfolio Changes:

There were no meaningful additions to the portfolio during the second quarter but we initiated a small position in Zhejiang Hangke, a leading Chinese battery cell-making equipment manufacturer. The company has a diversified customer base and is expected to benefit from fast-growing battery cell manufacturing capabilities globally. There were no exits during the quarter.

Outlook:

Looking ahead, the Fed’s pace and scope of interest rate hikes and quantitative tightening and the market’s expectation of its evolution remain the most important variables to watch and will have near-term implications for regional, sector and style performance. Russia’s invasion of Ukraine and the attendant impact on energy prices also needs careful watching.

We expect corporate earnings to moderate in 2022 and remain watchful about the impact of inflation on financial results. Across the region we see sufficient liquidity, and while we have not seen as much uptake in credit, any meaningful pick up in credit issuance should further support economic growth. In many parts of Asia, COVID-19 vaccination is progressing well and provides hope for economic activity normalization in the coming quarters but China’s zero-COVID policy and its variants need monitoring.

Over the mid-to-long term, we continue to believe that companies that address critical challenges such as climate change and inclusive development will continue to thrive. And for investors interested in sustainability themes, including reducing carbon emissions, alleviating poverty and creating greater financial inclusion in the developing world, Asia remains a key investment destination, in our view. To tackle sustainable themes globally, we believe we need to include the world’s most populous economies, many of which lie in Asia.

As the global economy embarks on a post-pandemic recovery path and markets contend with macro headwinds and volatility, we believe there are attractive opportunities for alpha generation throughout our large, diverse, sustainable investment universe.

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

 

Average Annual Total Returns - MASGX as of 06/30/2022
1YR 3YR 5YR 10YR Since Inception Inception Date
-13.98% 13.03% 9.91% N.A. 8.10% 04/30/2015

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 1.35%

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. Matthews Emerging Markets Sustainable Future Fund’s consideration of ESG factors in making its investment decisions may impact the Fund’s relative investment performance positively or negatively.

 

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.