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Matthews Emerging Markets Sustainable Future Fund
MASGX

The Matthews Asia ESG Fund won the inaugural 2021 UNCTAD Sustainable Emerging Market Fund Award. Press Release. Methodology.

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

3.99%

YTD Return

(as of 07/11/2024)

$13.04

NAV

(as of 07/11/2024)

+0.05

1 Day NAV Change

(as of 07/11/2024)

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 $239.87 million (06/30/2024)
Currency USD
Ticker MASGX
Cusip 577-130-727
Portfolio Turnover 49.2%
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 1.23%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 06/30/2024
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
0.56% 0.16% 1.04% 0.66% -3.07% 8.87% n.a. 6.94%
MSCI Emerging Markets Index
4.01% 5.12% 7.68% 12.98% -4.68% 3.49% n.a. 3.28%
As of 06/30/2024
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
0.56% 0.16% 1.04% 0.66% -3.07% 8.87% n.a. 6.94%
MSCI Emerging Markets Index
4.01% 5.12% 7.68% 12.98% -4.68% 3.49% n.a. 3.28%
For the years ended December 31st
Name 2023 2022 2021 2020 2019 2018 2017 2016
Matthews Emerging Markets Sustainable Future Fund - MASGX
MASGX
7.83% -14.38% 11.76% 42.87% 12.55% -9.73% 33.79% -1.40%
MSCI Emerging Markets Index
10.27% -19.74% -2.22% 18.69% 18.88% -14.24% 37.75% 11.60%

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

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 06/30/2024)

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 718 funds
  • 3 YEAR
  • out of 718 funds
  • 5 YEAR
  • out of 646 funds
  • 1 YEAR
  • 4th
  • 746 out of 8 funds
  • 3 YEAR
  • 2nd
  • 203 out of 6 funds
  • 5 YEAR
  • 1st
  • 23 out of 4 funds
  • SINCE INCEPTION
  • 1st
  • 3 out of 440 funds

Ratings agency calculation methodology

Portfolio Managers

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Inbok  Song photo
Inbok Song

Co-Manager

Alex  Zarechnak photo
Alex Zarechnak

Co-Manager

Portfolio Characteristics

(as of 06/30/2024)
Fund Benchmark
Number of Positions 54 1,330
Weighted Average Market Cap $25.1 billion $157.1 billion
Active Share 98.4 n.a.
P/E using FY1 estimates 17.3x 12.9x
P/E using FY2 estimates 13.6x 11.2x
Price/Cash Flow 10.7 8.2
Price/Book 2.5 1.8
Return On Equity 13.4 15.9
EPS Growth (3 Yr) 27.1% 18.8%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 03/31/2024)
4.65%
Alpha
0.96
Beta
103.44%
Upside Capture
88.13%
Downside Capture
-0.15
Sharpe Ratio
0.45
Information Ratio
9.67%
Tracking Error
75.69

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 06/30/2024)
Name Sector Country % Net Assets
Meituan Class B Consumer Discretionary China/Hong Kong 6.4
Bandhan Bank, Ltd. Financials India 6.3
Shriram Finance, Ltd. Financials India 6.0
Full Truck Alliance Co., Ltd. Industrials China/Hong Kong 5.4
Micron Technology, Inc. Information Technology United States 4.0
JD Health International, Inc. Consumer Staples China/Hong Kong 4.0
Legend Biotech Corp. Health Care China/Hong Kong 4.0
Hong Kong Exchanges & Clearing, Ltd. Financials China/Hong Kong 3.7
Indus Towers, Ltd. Communication Services India 3.2
Samsung SDI Co., Ltd., Pfd. Information Technology South Korea 3.1
TOTAL 46.1

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 06/30/2024)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Financials 25.6 21.9 3.7
Information Technology 24.4 25.1 -0.7
Industrials 15.1 6.9 8.2
Consumer Discretionary 13.0 12.3 0.7
Health Care 6.6 3.2 3.4
Consumer Staples 6.5 5.2 1.3
Communication Services 4.6 8.9 -4.3
Real Estate 4.0 1.5 2.5
Materials 1.0 6.9 -5.9
Utilities 0.3 3.0 -2.7
Energy 0.0 5.2 -5.2
Liabilities in Excess of Cash and Other Assets -1.1 0.0 -1.1

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 35.9 25.2 10.7
India 24.4 19.2 5.2
Taiwan 9.9 19.3 -9.4
South Korea 7.9 12.2 -4.3
Brazil 5.1 4.2 0.9
United States 4.0 0.0 4.0
Poland 3.2 1.0 2.2
South Africa 2.2 3.0 -0.8
Saudi Arabia 2.1 3.9 -1.8
Romania 1.7 0.0 1.7
Turkey 1.6 0.8 0.8
Vietnam 1.3 0.0 1.3
Jordan 1.0 0.0 1.0
Bangladesh 0.4 0.0 0.4
Chile 0.3 0.4 -0.1
Mexico 0.0 2.1 -2.1
Indonesia 0.0 1.6 -1.6
Malaysia 0.0 1.4 -1.4
Thailand 0.0 1.3 -1.3
United Arab Emirates 0.0 1.1 -1.1
Qatar 0.0 0.8 -0.8
Kuwait 0.0 0.7 -0.7
Greece 0.0 0.5 -0.5
Philippines 0.0 0.5 -0.5
Peru 0.0 0.3 -0.3
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
Liabilities in Excess of Cash and Other Assets -1.1 0.0 -1.1

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 21.7 57.4 -35.7
Large Cap ($10B-$25B) 17.0 22.1 -5.1
Mid Cap ($3B-$10B) 40.5 19.7 20.8
Small Cap (under $3B) 21.9 0.8 21.1
Liabilities in Excess of Cash and Other Assets -1.1 0.0 -1.1

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.

Portfolio Breakdown benchmark reflects the MSCI Emerging Markets Index as of 6/30/23.

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 $0.25011 $0.17470 $0.51859 $0.94340 7.2% N.A.
12/13/2022 12/14/2022 $0.04203 $0.06010 $0.57198 $0.67411 4.9% N.A.
12/14/2021 12/15/2021 $0.00000 $0.70374 $0.64204 $1.34578 7.8% N.A.
12/15/2020 12/16/2020 $0.00950 $0.39961 $0.43641 $0.84552 6.0% N.A.
12/16/2019 12/17/2019 $0.03010 $0.00000 $0.12078 $0.15088 1.4% 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. 

Contributors and Detractors

  • For the quarter ended March 31, 2024, the Emerging Markets Sustainable Future Fund returned 0.88%, (Investor Class) and 0.88% (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 the U.S. due to an off-benchmark allocation, Saudi Arabia due to stock selection and South Africa due to zero allocation. The top three detractors to relative performance  were Taiwan, China/Hong Kong and Brazil due to stock selection.
  • The top three contributors to relative performance, on a sector basis, were real estate due to stock selection, materials due to an underweight allocation and consumer discretionary due to stock selection. The top three detractors to relative performance were consumer staples, health care and financials due to stock selection.
  • The largest contributors to absolute performance during the quarter included Shriram Finance, an Indian financial services provider, Micron Technology, a U.S. semiconductor manufacturer, and Indus Towers, an Indian telecommunication infrastructure company. The top three detractors to performance during the quarter included JD Health International, a Chinese online healthcare platform, Bandhan Bank, an Indian commercial bank, and TSMC, a leading Taiwan semiconductor foundry.

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.
  • Finally, we view sustainable investing as a synonym for long-term investing. Our approach focuses on investing in companies that are well-positioned to embrace global, multidecadal trends, including addressing critical challenges like climate change and inclusive development. These companies also tend to be good at identifying and proactively addressing long-term risks to their businesses. Emerging markets, we believe, are a key destination for sustainable investment themes that offer attractive opportunities for alpha generation.

 

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 - MASGX as of 06/30/2024
1YR 3YR 5YR 10YR Since Inception Inception Date
0.66% -3.07% 8.87% N.A. 6.94% 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. For the Fund's most recent month-end performance visit matthewsasia.com

Fees & Expenses
Gross Expense Ratio 1.23%

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.