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30/04/2015
Inception Date
-5.59%
YTD Return (USD)
(as of 06/05/2021)
$17.38
Price (USD)
(as of 06/05/2021)
$187.10 million
Fund Assets
(as of 31/03/2021)
Long-term capital appreciation
The Fund seeks to achieve its investment objective by investing, directly or indirectly, at least 65% of its total net assets, in publicly traded common stocks, preferred stocks and convertible securities of companies located in Japan, and may invest the remainder of its net assets in other permitted assets on a worldwide basis.
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 and emerging market securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. The Fund invests in holdings denominated in foreign currency, 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. Investments in a single-country fund may be subject to a higher degree of market risk than diversified funds because of concentration in a specific country.
The risks associated with investing in the Fund can be found in the prospectus.
| Inception Date | 30/04/2015 | |
| Fund Assets | $187.10 million (31/03/2021) | |
| Base Currency | USD | |
| ISIN: | LU1220257130 (USD) LU1220257486 (GBP) LU1525503915 (USD Hedged) LU1525504053 (EUR Hedged) | |
| Bloomberg Symbol | MAFJFIU:LX (USD) MAFJFIG:LX (GBP) MAFJIHU:LX (USD Hedged) MAFJIHE:LX (EUR Hedged) | |
| Benchmark | MSCI Japan Index | |
| Geographic Focus | Japan | |
| Management Fee | 0.75% | |
| Total Expense Ratio As of 31/03/2020 | 1.14% ( USD ) 1.17% ( GBP ) 1.19% ( USD Hedged ) 1.18% ( EUR Hedged ) | |
Source: Brown Brothers Harriman (Luxembourg) S.C.A.
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.
Source: Brown Brothers Harriman (Luxembourg) S.C.A
Source: FactSet Research Systems
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
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.
Ratings (as of 31/03/2021)
CATEGORY: Japan Large-Cap Equity
Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.
Overall Morningstar RatingTM is reflective of the USD Accumulation Share class. Fund ratings represent an opinion only and are not a recommendation to buy or sell any fund. Copyright ©2021 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is provided for reference purposes only.
The Overall Morningstar®️ Rating for a fund is derived from a weighted-average of the performance figures associated with its three-, five- and (if applicable) ten-year ratings.
Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
Lead Manager
Portfolio Manager
Taizo Ishida is a Portfolio Manager at Matthews Asia. He manages the firm’s Asia Growth and Japan Strategies. Prior to joining Matthews Asia in 2006, Taizo spent six years on the global and international teams at Wellington Management Company as a Vice President and Portfolio Manager. From 1997 to 2000, he was a Senior Securities Analyst and a member of the international investment team at USAA Investment Management Company. From 1990 to 1997, he was a Principal and Senior Research Analyst at Sanford Bernstein & Co. Prior to beginning his investment career at Yamaichi International (America), Inc. as a Research Analyst, he spent two years in Dhaka, Bangladesh as a Program Officer with the United Nations Development Program. Taizo received a B.A. in Social Science from International Christian University in Tokyo and an M.A. in International Relations from The City College of New York. He is fluent in Japanese.
Lead Manager
Portfolio Manager
Shuntaro Takeuchi is a Portfolio Manager at Matthews Asia and manages the firm’s Japan Strategy. Prior to joining the firm in 2016 as a Senior Research Analyst, he was an Executive Director for Japan Equity Sales at UBS Securities LLC in New York. Beginning in 2003, he worked on both Japanese Equity and International Equity Sales at UBS Japan Securities, based in Tokyo, and held the position of Special Situations Analyst from 2006 to 2008, and Head of International Equity Sales from 2009 to 2013. Before that, he worked at Merrill Lynch Japan from 2001 to 2003 in U.S. Equity Sales. Shuntaro received a B.A. in Commerce and Management from Hitotsubashi University in Tokyo. He is fluent in Japanese.
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 Markit iBoxx Asian Local Bond Index tracks the total return performance of a bond portfolio consisting of local-currency denominated, high quality and liquid bonds in Asia ex-Japan. The Markit iBoxx Asian Local Bond Index includes bonds from the following countries: China (on- and offshore markets), Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.
The J.P. Morgan Asia Credit Index (JACI) tracks the total return performance of the Asia fixed-rate dollar bond market. JACI is a market cap-weighted index comprising sovereign, quasi-sovereign and corporate bonds and is partitioned by country, sector and credit rating. JACI includes bonds from the following countries: China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea and Thailand.
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 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).
Commentary
Period ended 31 March 2021
For the quarter ending 31 March 2021, the Matthews Japan Fund returned -5.38%, while its benchmark, the MSCI Japan Index, returned 1.70%.
Market Environment:
Japan’s equity markets generated positive returns in the quarter, continuing a market rebound that began in March 2020. Swift monetary expansion actions by the major central banks along with large scale fiscal policy measures to offset the negative economic impact resulted in risk-taking investment actions especially in growth oriented stocks for the year of 2020. However the first three months of 2021 painted a completely different picture in terms of factor returns, where high-quality names got sold off while deep value names rose rapidly amid a sudden surge in U.S. 10 year bond yields.
While there was a shift in sentiment toward value in the first quarter, we continue to view Japan as a cyclical growth market. We expect bond yields to normalize over time, likely rising at a slower pace ahead as the global economy continues its recovery to pre-COVID levels. Viewing Japan’s market environment through the lens of a cyclical earnings recovery, sectors such as industrials and exports are likely to benefit from the ongoing rebound in global economic growth and resumption of global trade.
Performance Contributors and Detractors:
After five consecutive quarters of delivering above benchmark investment results, the first quarter 2021 was a difficult one given the characteristics of our portfolio. The Fund is a quality core growth portfolio with a focus on high return on assets and return on invested capital, attractive cashflow generation and medium-term (36 months) earnings momentum. As a result, our portfolio companies naturally tend to trade at a premium valuation to overall market average, and arevulnerable to a sudden change in equity risk premiums, which has happened during the quarter amid a rapid rise in bond yields. The majority of our underperformance versus the benchmark happened in a matter of six weeks, when the U.S. 10 year bond yield moved from 1% to 1.6% in a very short window of time.
The investment results for the recent three months were dragged down by our two key overweight sectors, information technology and health care. The industrials sector, which contains commodity price sensitive trading companies and cyclical transport companies, also was a detractor to our performance. With regards to market cap, our overweight in small and mid-cap stocks (those under US$10 billion) also contributed negatively as large caps outperformed small caps.
Turning to individual securities, Advantest, a leading manufacturer of semiconductor testing devices, was a contributor to performance. On top of the continued shortage of semiconductors, we believe there is a structural trend in increasing complexity and sophistication of semiconductors leading to longer-test times and more item subjects to test, which will benefit the company's testing equipment demand.
Specialty chemical company Sumitomo Bakelite also was a contributor. 50% of the company’s profits come from semiconductor materials segment, where they are a global leader in semiconductor insulating materials.
AI inside, a SaaS providor of OCR software, was a detractor from performance. One of their core KPIs (Key Performance Indicators), new account growth, decelerated in their most recent quarterly results. While overall growth remain high, expensive valuation levels left very little room for error. We exited the name during the quarter after meeting the CEO.
SMS, a top health care sector staffing specialist in Japan, with emphasis on elderly care managers and nursing care professionals, also was a detractor. While we have trimmed our position into earnings, recognizing a disconnect between short term share price momentum and near term earnings, an in-line result led to equity multiple contraction.
Notable Portfolio Changes:
Our portfolio actions during the quarter were a continuation of increasing our exposure to cyclical growth companies as economic activity started to bottom out and improve.
We initiated a new position in AGC, a leading global glass manufacturer that leverages its technical prowess in chemical (PVC), electronics (Optoelectronics & Semi Materials), and health care (Contract Development and Manufacturing Organization) field. We have a positive view on the new management taking more extensive measures to improve earnings in its existing core glass business, and as the profit contribution from its strategic businesses increase at rapid rate. Inexpensive valuation levels provided an attractive entry point, as we believed the stock price did not yet reflect management initiatives.
Toyota Industries, a top global supplier of forklifts and A/C compressors used for cars, is another position initiated during the quarter. We believe the company is set to grow both of its core divisions. Its auto parts business is benefiting from higher penetration of electric vehicles (EVs).The stock is still attractively valued and we expect re-rating to continue as overall return on equity improves with rising contribution from high profit margin products.
To fund these positions, we exited AI inside, East Japan Railway, Fast Retailing, Itochu Techno-Solutions, Kaonavi, Makita, Plaid, Takeda Pharmaceuticals, Tokio Marine, and Yappli.
Outlook:
As we wrote in the year-end commentary, we think 2021 will not be as much of a one-way street as 2020, where growth-oriented names performed strongly in a recessionary environment coupled with lower interest rates and ample money supply. With profit recovery already baked in current consensus estimates and valuation levels, upside surprise in profits will ever be more important in investment returns going forward. We will continue to look for investment opportunities in high-quality companies that can continue to execute well, but at the same time we will also seek for opportunities in cyclical areas that have a potential to achieve high growth via lower and easier comp.
From a structural point of view, we continue to believe the earnings capability of Japanese companies has improved meaningfully over the past economic cycle, driven by better corporate governance and a higher focus on capital efficiency. Multiyear trends such as productivity growth, health care, technology and material science innovation—where Japanese corporations excel versus global peers—not only remains intact, but we think the pace of change will accelerate as COVID-19 provided a stress test on the health care system and costs, as well as labor productivity issues in white collar jobs as more people work remotely.
Rolling 12 Month Returns For the period ended 31/03/2021 - I (Acc)
Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Matthews Asia, FactSet Research Systems, Bloomberg