A focus on Asia—and providing compelling investment solutions for our clients—is what we believe distinguishes us among investment managers. Our insights into investment opportunities and risks are backed by proprietary research, a collaborative culture and 30 years of experience.
The Fund promotes environmental and social characteristics according to Article 8 of SFDR. Furthermore, the Fund uses both activity- and norm-based exclusions. Information relating to the environmental and social characteristics of this Fund is available in the prospectus.
Strategy
The Fund seeks to achieve its investment objective by investing, directly or indirectly, at least 65% of its total net assets in companies Asia ex Japan that Matthews Asia believes are capable of growth based on innovation, which could be innovation in products or services or in other areas, such as processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets.
Risks
The value of an investment in the Fund can go down as well as up and possible loss of principal is a risk of investing. Investments in international, emerging and frontier market securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation, which may adversely affect the value of the Fund's assets. The Fund invests in holdings denominated in foreign currencies, and is exposed to the risk that the value of the foreign currency will increase or decrease. The Fund invests primarily in equity securities, which may result in increased volatility.
These and other risks associated with investing in the Fund can be found in the
prospectus.
Asia Ex Japan: Consists of all countries and markets in Asia, excluding Japan but including all developed, emerging and frontier countries and markets in Asia
SFDR Classification
Article 8
Fees & Expenses
Management Fee
0.75%
Total Expense Ratio
As of 31/03/2022
0.90%
( USD )
0.90%
( GBP )
Objective
Long-term capital appreciation.
Strategy
The Fund seeks to achieve its investment objective by investing, directly or indirectly, at least 65% of its total net assets in companies Asia ex Japan that Matthews Asia believes are capable of growth based on innovation, which could be innovation in products or services or in other areas, such as processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets.
Risks
The value of an investment in the Fund can go down as well as up and possible loss of principal is a risk of investing. Investments in international, emerging and frontier market securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation, which may adversely affect the value of the Fund's assets. The Fund invests in holdings denominated in foreign currencies, and is exposed to the risk that the value of the foreign currency will increase or decrease. The Fund invests primarily in equity securities, which may result in increased volatility.
The risks associated with investing in the Fund can be found in the prospectus
Performance
Monthly
Quarterly
Calendar Year
Rolling 12 Month Returns
As of 29/02/2024
Annualized Returns
Name
1MO
3MO
YTD
1YR
3YR
5YR
10YR
Since Inception
Inception Date
Matthews Asia Innovative Growth Fund (USD)
6.96%
6.44%
4.75%
3.44%
n.a.
n.a.
n.a.
-13.15%
23/03/2021
MSCI All Country Asia ex Japan Index (USD)
5.62%
3.41%
-0.13%
5.31%
n.a.
n.a.
n.a.
-7.77%
Matthews Asia Innovative Growth Fund (GBP)
7.29%
6.50%
5.41%
-0.96%
n.a.
n.a.
n.a.
-10.54%
23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
6.33%
3.49%
0.65%
0.79%
n.a.
n.a.
n.a.
-5.01%
As of 31/12/2023
Annualized Returns
Name
1MO
3MO
YTD
1YR
3YR
5YR
10YR
Since Inception
Inception Date
Matthews Asia Innovative Growth Fund (USD)
1.61%
5.52%
-2.62%
-2.62%
n.a.
n.a.
n.a.
-15.29%
23/03/2021
MSCI All Country Asia ex Japan Index (USD)
3.55%
6.48%
6.34%
6.34%
n.a.
n.a.
n.a.
-8.16%
Matthews Asia Innovative Growth Fund (GBP)
1.03%
1.63%
-7.94%
-7.94%
n.a.
n.a.
n.a.
-12.79%
23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
2.83%
1.95%
0.34%
0.34%
n.a.
n.a.
n.a.
-5.51%
For the years ended December 31st
Name
2023
2022
2021
2020
2019
Matthews Asia Innovative Growth Fund (USD)
-2.62%
-24.74%
n.a.
n.a.
n.a.
MSCI All Country Asia ex Japan Index (USD)
6.34%
-19.36%
n.a.
n.a.
n.a.
Matthews Asia Innovative Growth Fund (GBP)
-7.94%
-15.66%
n.a.
n.a.
n.a.
MSCI All Country Asia ex Japan Index (GBP)
0.34%
-9.19%
n.a.
n.a.
n.a.
For the period ended 31/12/2023
Name
2023
2022
2021
2020
2019
Inception Date
Matthews Asia Innovative Growth Fund (USD)
-2.62%
-24.74%
n.a.
n.a.
n.a.
23/03/2021
MSCI All Country Asia ex Japan Index (USD)
6.34%
-19.36%
n.a.
n.a.
n.a.
Matthews Asia Innovative Growth Fund (GBP)
-7.94%
-15.66%
n.a.
n.a.
n.a.
23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
0.34%
-9.19%
n.a.
n.a.
n.a.
Source: Brown Brothers Harriman (Luxembourg) S.C.A.
All returns over 1 year are annualized
Since inception performance for share classes with less than one year of history represents actual performance, not annualised. In addition, for share classes less than a year old, Year to Date Return is calculated since inception. Where no past performance is shown there was insufficient data available in that year to provide performance.
Performance details provided are based on a NAV-to-NAV basis with any dividends reinvested, and are net of management fees and other expenses. Performance data has been calculated in the respective currencies stated above, including ongoing charges and excluding subscription fee and redemption fee you might have to pay.
All performance quoted represents past performance and is not indicative of future performance. Investors may not get back the full amount invested. Investors investing in funds denominated in non-local currency should be aware of the risk of currency exchange fluctuations that may cause a loss of principal.
Additional performance, attribution, liquidity, value at risk (VaR), security classification and holdings information is available on request for certain time periods.
Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: Brown Brothers Harriman (Luxembourg) S.C.A
Portfolio Breakdown (%)
(as of 29/02/2024)
Sector Allocation
Country Allocation
Market Cap Exposure
Sector
Fund
Benchmark
Difference
Information Technology
41.9
26.0
15.9
Consumer Discretionary
25.0
13.9
11.1
Financials
11.5
20.7
-9.2
Industrials
7.8
7.7
0.1
Communication Services
5.8
8.9
-3.1
Energy
3.0
4.1
-1.1
Health Care
2.4
3.8
-1.4
Materials
0.0
4.7
-4.7
Consumer Staples
0.0
4.6
-4.6
Real Estate
0.0
2.9
-2.9
Utilities
0.0
2.7
-2.7
Cash and Other Assets, Less Liabilities
2.7
0.0
2.7
Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.
Country
Fund
Benchmark
Difference
India
25.6
20.5
5.1
China/Hong Kong
24.1
35.4
-11.3
Taiwan
18.4
19.3
-0.9
South Korea
12.8
14.6
-1.8
United States
9.9
0.0
9.9
Indonesia
3.4
2.2
1.2
Netherlands
2.0
0.0
2.0
Brazil
1.1
0.0
1.1
Singapore
0.0
3.6
-3.6
Thailand
0.0
1.9
-1.9
Malaysia
0.0
1.6
-1.6
Philippines
0.0
0.8
-0.8
Macau
0.0
0.2
-0.2
Cash and Other Assets, Less Liabilities
2.7
0.0
2.7
Not all countries are included in the benchmark index(es).
Equity market cap of issuer
Fund
Benchmark
Difference
Mega Cap (over $25B)
65.4
58.6
6.8
Large Cap ($10B-$25B)
16.7
22.3
-5.6
Mid Cap ($3B-$10B)
13.9
17.6
-3.7
Small Cap (under $3B)
1.3
1.4
-0.1
Cash and Other Assets, Less Liabilities
2.7
0.0
2.7
Source: FactSet Research Systems unless otherwise noted. 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.
Sustainability-related Disclosures
This Fund
Yes
No
Complies with Article 8 of SFDR
Investment process integrates ESG factors and sustainability risks based on proprietary and third-party research
Applies norms- and activity-based exclusions
Promotes environmental and social characteristics
Has a sustainable investment objective
Conducts engagement
Exercises Voting Rights
Investors should not invest in the Fund solely based on the information in this material alone. Please refer to the Prospectus for further details of the Fund’s investment objective and risk factors.
Michael Oh is a Portfolio Manager at Matthews and manages the firm’s Asia Innovators, Asia Growth and Korea Strategies. Michael joined Matthews in 2000, and has built his investment career at the firm. Michael was promoted from Research Analyst to Assistant Portfolio Manager in 2003. In 2006 and 2007, he was promoted to Lead Manager of the Matthews Asia Innovators Strategy and the Matthews Korea Strategy, respectively. From 2000-2003, Michael’s research focused on the technology sector supporting multiple strategies managed by the founders of the firm. As a research analyst, he contributed investment ideas to the broader Matthews investment teams. Michael received a B.A. in Political Economy of Industrial Societies from the University of California, Berkeley. He is fluent in Korean.
Inbok Song is a Portfolio Manager at Matthews and manages the firm’s Pacific Tiger and Asia ex Japan Total Return Equity Strategies and co-manages the Emerging Markets Sustainable Future and Asia Innovators Strategies. Prior to rejoining Matthews in 2019, Inbok spent three years at Seafarer Capital Partners as a portfolio manager, the firm’s Director of Research and chief data scientist. Previously she was at Thornburg Investment Management as an associate portfolio manager. From 2007 to 2015, she was at Matthews, most recently as a portfolio manager. From 2005 to 2006, Inbok served as an Analyst and Technology Specialist at T. Stone Corp., a private equity firm in Seoul, South Korea. From 2004 to 2005, she was a research engineer for Samsung SDI in Seoul. Inbok received both a B.A. and Masters in Materials Science and Engineering from Seoul National University. She received a Masters in International Management from the University of London, King’s College, and also an M.A. in Management Science and Engineering, with a concentration in finance from Stanford University. Inbok is fluent in Korean.
For the year ending 31 December 2023, the Matthews Asia Innovative Growth Fund returned -2.62%, while its benchmark, the MSCI All Country Asia ex Japan Index returned 6.34%. For the fourth quarter of the year, the Fund returned 5.52% versus 6.48% for the benchmark.
Market Environment
2023 was challenging on many levels for Asia equity markets. At the macro level, rising interest rates and a strong U.S. dollar were headwinds for the region. Growth companies were out of favor while value companies relatively outperformed. Geopolitical tensions between the U.S. and China also remained elevated, particularly in the first half, and we expect these tensions to continue. The most notable feature, however, was the prolonged weakness of the Chinese economy. The rapid post-COVID recovery that many investors expected didn’t materialize and the country instead struggled with a lack of confidence and problems in specific sectors like real estate. Mitigating China’s woes somewhat was India’s continued resilient growth, supported in part by its domestic infrastructure programs and increasing global trade. Information technology (IT) was the largest contributor to returns in the region, while communication services was among the laggards. Toward the end of the year, there was a general consensus that inflation had peaked in the global economy and that the U.S. Federal Reserve would pivot toward cutting rates in 2024 and the dollar would weaken. This provided some tailwinds across the region in the final quarter of 2023.
Performance Contributors and Detractors
Regionally, our stock selection in China/Hong Kong was the biggest detractor to total and relative returns in 2023. Our exposure was hurt by the much slower-than-expected recovery in China, international concerns over geopolitical risks, and regulatory uncertainties related to technology companies. Stock selection in South Korea and India detracted from relative returns as did an underweight in Taiwan which rallied last year. In India, selection was hurt by not owning more utilities and infrastructure-related names. We added more exposure to infrastructure-related companies in the last quarter. On the other hand, an off-benchmark position in the U.S. was the top contributor to relative returns. We invest in companies that are generating more than 50% of their revenue from Asia but are not necessarily based in Asia. An underweight to Thailand and lack of exposure to Malaysia also contributed.
At the sector level, stock selections in communication services and health care were the biggest detractors from relative returns. In contrast, stock selection in real estate was the top contributor; a lack of exposure to utilities and materials also contributed.
On a company basis, PDD Holdings, the Chinese operator of the Pinduoduo e-commerce app, was the best biggest contributor to total and relative returns in 2023. PDD has been gaining market share in China and its overseas unit, Temu, has been growing rapidly. Alchip was the best performer and another big contributor to returns. The Taiwan-based provider of silicon designs and manufacturing services for the chip industry is well positioned, we believe, to benefit from on-going developments in the artificial intelligence (AI) industry. E-commerce giant Alibaba was the biggest detractor to returns and Kuaishou Technology, a video-sharing platform, also detracted. Alibaba’s topline growth slowed in 2023 and it lost market share to competitors. Kuaishou’s fundamentals are still sound in our view, but the stock has suffered amid persisting uncertainties around China’s regulatory environment.
Notable Portfolio Changes
We reduced our China exposure in the portfolio in a meaningful way in the last quarter as we feel the opportunity set has shrunk due to higher regulatory risks, a persisting weak domestic economy and soft consumer sentiment. Among our exits were Alibaba, digital services platform Baidu, video platform Bilibili and Kuaishou Technology. On the other hand, we added Godrej Consumer Products, an India-based consumer staples company, and Shenzhen-based BYD Company, the world’s largest maker of electric vehicles (EVs). In India, consumer staples is one area that will continue to see stable growth going forward, in our view, and Godrej Consumer Products is well positioned to benefit. BYD surpassed the EV market share of Tesla in the last quarter. We are focusing on Chinese companies with competitive international business models and BYD fits into this strategy well.
Outlook
Overall we’re optimistic for 2024. We pivoted during the last quarter of the year to adjust the country weightings in the portfolio to address on-going evolution in the region. China remains challenging. We believe the government is not making necessary reforms to improve its domestic economy and unless we see a firm change in policies and an improvement in the regulatory environment we will maintain a cautious view on the Chinese equity market.
In contrast, we are optimistic on India. It doesn’t have the same issues that have negatively impacted the Chinese market and, in many ways, India has the potential to replicate the success that China has had in the past 20 years. Valuations, however, remain elevated and we will be very selective in picking our investments.
More generally, the semiconductor industry is passing the bottom of the cycle and Asia maintains its leading edge when it comes to the foundry and the memory segments which are the backbone of the global industry. The consumer market in Asia also remains the largest and fastest growing market in the world and provides a great foundation for innovation and entrepreneurship to flourish.
Rolling 12 Month Returns For the period ended 31/12/2023 - I (Acc)
Performance figures discussed in the Fund Manager Commentary above reflect that of the Institutional Accumulation Class Shares and has been calculated in USD. Performance details provided for the Fund are based on a NAV-to-NAV basis, with any dividends reinvested, and are net of management fees and other expenses. Past performance information is not indicative of future performance. Investors may not get back the full amount invested.
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. Matthews Asia and its affiliates do not accept any liability for losses either direct or consequential caused by the use of this information.
Information contained herein is sourced from Matthews Asia unless otherwise stated. The views and opinions in this commentary were as of the report date, subject to change and may not reflect the writer’s 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.
Investors should not invest in the Fund solely based on the information in this material alone. Please refer to the Prospectus for further details of the risk factors.
The MSCI All Country Asia ex Japan Index is a free float–adjusted market capitalization–weighted index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI All Country Asia Pacific Index is a free float–adjusted market capitalization–weighted index of the stock markets of Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Index is a free float-adjusted market capitalization-weighted index of Chinese equities that includes H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges, Hong Kong-listed securities known as Red chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China) and foreign listings (e.g. ADRs).
The MSCI China All Shares Index captures large and mid-cap representation across China A shares, B shares, H shares, Red chips (issued by entities owned by national or local governments in China), P chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g. ADRs). The index aims to reflect the opportunity set of China share classes listed in Hong Kong,Shanghai, Shenzhen and outside of China.
The MSCI China A Onshore Index captures large and mid cap representation across China securities listed on the Shanghai and Shenzhen exchanges. Index is for comparative purposes only and it is not possible to invest directly in an index.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets ex China Index is a free float-adjusted market capitalization-weighted index that captures large and mid cap representation across 23 of the 24 Emerging Markets (EM) countries excluding China: Brazil, Chile, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
The MSCI Emerging Markets Small Cap Index is a free float-adjusted market capitalization weighted small cap index of the stock markets of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungry, India, Indonesia, Kuwait, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, South Korea, Taiwan Thailand, Turkey and United Arab Emirates.
The S&P Bombay Stock Exchange 100 (S&P BSE 100) Index is a free float–adjusted market capitalization–weighted index of 100 stocks listed on the Bombay Stock Exchange.
The MSCI Japan Index is a free float–adjusted market capitalization–weighted index of Japanese equities listed in Japan.
The MSCI All Country Asia ex Japan Small Cap Index is a free float–adjusted market capitalization–weighted small cap index of the stock markets of China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea, Taiwan and Thailand.
The MSCI China Small Cap Index is a free float-adjusted market capitalization-weighted small cap index of the Chinese equity securities markets, including H shares listed on the Hong Kong exchange, B shares listed on the Shanghai and Shenzhen exchanges,Hong Kong-listed securities known as Red Chips (issued by entities owned by national or local governments in China) and P Chips (issued by companies controlled by individuals in China and deriving substantial revenues in China), and foreign listings (e.g., ADRs).
The MSCI India Index is a free float-adjusted market capitalization-weighted index of Indian equities listed in India.
Indexes are for comparative purposes only and it is not possible to invest directly in an index.
Commentary
Period ended 31 December 2023
For the year ending 31 December 2023, the Matthews Asia Innovative Growth Fund returned -2.62%, while its benchmark, the MSCI All Country Asia ex Japan Index returned 6.34%. For the fourth quarter of the year, the Fund returned 5.52% versus 6.48% for the benchmark.
Market Environment
2023 was challenging on many levels for Asia equity markets. At the macro level, rising interest rates and a strong U.S. dollar were headwinds for the region. Growth companies were out of favor while value companies relatively outperformed. Geopolitical tensions between the U.S. and China also remained elevated, particularly in the first half, and we expect these tensions to continue. The most notable feature, however, was the prolonged weakness of the Chinese economy. The rapid post-COVID recovery that many investors expected didn’t materialize and the country instead struggled with a lack of confidence and problems in specific sectors like real estate. Mitigating China’s woes somewhat was India’s continued resilient growth, supported in part by its domestic infrastructure programs and increasing global trade. Information technology (IT) was the largest contributor to returns in the region, while communication services was among the laggards. Toward the end of the year, there was a general consensus that inflation had peaked in the global economy and that the U.S. Federal Reserve would pivot toward cutting rates in 2024 and the dollar would weaken. This provided some tailwinds across the region in the final quarter of 2023.
Performance Contributors and Detractors
Regionally, our stock selection in China/Hong Kong was the biggest detractor to total and relative returns in 2023. Our exposure was hurt by the much slower-than-expected recovery in China, international concerns over geopolitical risks, and regulatory uncertainties related to technology companies. Stock selection in South Korea and India detracted from relative returns as did an underweight in Taiwan which rallied last year. In India, selection was hurt by not owning more utilities and infrastructure-related names. We added more exposure to infrastructure-related companies in the last quarter. On the other hand, an off-benchmark position in the U.S. was the top contributor to relative returns. We invest in companies that are generating more than 50% of their revenue from Asia but are not necessarily based in Asia. An underweight to Thailand and lack of exposure to Malaysia also contributed.
At the sector level, stock selections in communication services and health care were the biggest detractors from relative returns. In contrast, stock selection in real estate was the top contributor; a lack of exposure to utilities and materials also contributed.
On a company basis, PDD Holdings, the Chinese operator of the Pinduoduo e-commerce app, was the best biggest contributor to total and relative returns in 2023. PDD has been gaining market share in China and its overseas unit, Temu, has been growing rapidly. Alchip was the best performer and another big contributor to returns. The Taiwan-based provider of silicon designs and manufacturing services for the chip industry is well positioned, we believe, to benefit from on-going developments in the artificial intelligence (AI) industry. E-commerce giant Alibaba was the biggest detractor to returns and Kuaishou Technology, a video-sharing platform, also detracted. Alibaba’s topline growth slowed in 2023 and it lost market share to competitors. Kuaishou’s fundamentals are still sound in our view, but the stock has suffered amid persisting uncertainties around China’s regulatory environment.
Notable Portfolio Changes
We reduced our China exposure in the portfolio in a meaningful way in the last quarter as we feel the opportunity set has shrunk due to higher regulatory risks, a persisting weak domestic economy and soft consumer sentiment. Among our exits were Alibaba, digital services platform Baidu, video platform Bilibili and Kuaishou Technology. On the other hand, we added Godrej Consumer Products, an India-based consumer staples company, and Shenzhen-based BYD Company, the world’s largest maker of electric vehicles (EVs). In India, consumer staples is one area that will continue to see stable growth going forward, in our view, and Godrej Consumer Products is well positioned to benefit. BYD surpassed the EV market share of Tesla in the last quarter. We are focusing on Chinese companies with competitive international business models and BYD fits into this strategy well.
Outlook
Overall we’re optimistic for 2024. We pivoted during the last quarter of the year to adjust the country weightings in the portfolio to address on-going evolution in the region. China remains challenging. We believe the government is not making necessary reforms to improve its domestic economy and unless we see a firm change in policies and an improvement in the regulatory environment we will maintain a cautious view on the Chinese equity market.
In contrast, we are optimistic on India. It doesn’t have the same issues that have negatively impacted the Chinese market and, in many ways, India has the potential to replicate the success that China has had in the past 20 years. Valuations, however, remain elevated and we will be very selective in picking our investments.
More generally, the semiconductor industry is passing the bottom of the cycle and Asia maintains its leading edge when it comes to the foundry and the memory segments which are the backbone of the global industry. The consumer market in Asia also remains the largest and fastest growing market in the world and provides a great foundation for innovation and entrepreneurship to flourish.
Rolling 12 Month Returns For the period ended 31/12/2023 - I (Acc)
Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Matthews Asia, FactSet Research Systems, Bloomberg