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Asia Growth

Matthews Japan Fund

Snapshot
  • High-conviction growth strategy seeks alpha in Japan
  • Unconstrained all-cap approach seeking Japanese companies positioned to benefit from Asia's growth
  • Invests in companies leveraged to the fast growing consumer demand across Asia, global industry leaders and entrepreneurial companies providing innovative domestic solutions

30/04/2015

Inception Date

-20.94%

YTD Return (USD)

(as of 20/05/2022)

$14.27

Price (USD)

(as of 20/05/2022)

$186.81 million

Fund Assets

(as of 30/04/2022)

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 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.

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 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.

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

Fund Facts
Inception Date 30/04/2015
Fund Assets $186.81 million (30/04/2022)
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
Fees & Expenses
Management Fee 0.75%
Total Expense Ratio As of 31/03/2022 0.80% ( USD ) 0.80% ( GBP ) 0.80% ( USD Hedged ) 0.80% ( EUR Hedged )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
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As of 30/04/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Japan Fund (USD)
-8.59% -12.00% -21.55% -18.29% 3.72% 4.71% n.a. 5.09% 30/04/2015
MSCI Japan Index (USD)
-8.80% -10.12% -14.68% -13.08% 3.50% 4.32% n.a. 3.71%
Matthews Japan Fund (GBP)
-4.41% -5.86% -15.74% -9.45% 4.97% 5.30% n.a. 8.19% 30/04/2015
MSCI Japan Index (GBP)
-4.36% -3.96% -7.96% -4.14% 4.81% 4.94% n.a. 6.75%
Matthews Japan Fund (USD Hedged)
-2.14% -0.89% -11.40% -2.39% 9.67% 9.04% n.a. 9.08% 03/04/2017
MSCI Japan Index 100% Hedged to USD (USD Hedged)
-2.34% 1.23% -3.82% 3.38% 9.83% 8.88% n.a. 8.94%
Matthews Japan Fund (EUR Hedged)
-2.37% -1.54% -12.09% -3.77% 7.93% 6.79% n.a. 6.90% 03/04/2017
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
-2.63% 0.79% -4.37% 2.17% 8.00% 6.62% n.a. 6.69%
As of 31/03/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Japan Fund (USD)
-2.09% -14.18% -14.18% -11.08% 7.87% 6.99% n.a. 6.53% 30/04/2015
MSCI Japan Index (USD)
-0.34% -6.45% -6.45% -6.14% 7.22% 6.48% n.a. 5.15%
Matthews Japan Fund (GBP)
-0.11% -11.85% -11.85% -6.68% 7.77% 5.88% n.a. 9.00% 30/04/2015
MSCI Japan Index (GBP)
1.56% -3.76% -3.76% -1.64% 6.85% 5.39% n.a. 7.52%
Matthews Japan Fund (USD Hedged)
2.98% -9.46% -9.46% -2.34% 11.71% n.a. n.a. 9.71% 03/04/2017
MSCI Japan Index 100% Hedged to USD (USD Hedged)
4.84% -1.52% -1.52% 3.11% 11.54% n.a. n.a. 9.61%
Matthews Japan Fund (EUR Hedged)
2.64% -9.96% -9.96% -3.62% 9.99% n.a. n.a. 7.53% 03/04/2017
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
4.76% -1.78% -1.78% 2.24% 9.69% n.a. n.a. 7.37%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016
Matthews Japan Fund (USD)
-1.96% 32.83% 25.54% -20.58% 33.40% 0.19%
MSCI Japan Index (USD)
2.04% 14.91% 20.07% -12.58% 24.39% 2.73%
Matthews Japan Fund (GBP)
-0.63% 28.30% 21.61% -16.16% 21.57% 20.43%
MSCI Japan Index (GBP)
2.98% 11.36% 15.44% -7.14% 13.62% 22.53%
Matthews Japan Fund (USD Hedged)
9.63% 25.29% 26.94% -20.85% n.a. n.a.
MSCI Japan Index 100% Hedged to USD (USD Hedged)
13.96% 10.14% 21.81% -13.31% n.a. n.a.
Matthews Japan Fund (EUR Hedged)
8.65% 24.18% 23.10% -23.30% n.a. n.a.
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
13.13% 8.27% 18.17% -15.92% n.a. n.a.
For the period ended 31/03/2022
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Japan Fund (USD)
-11.08% 51.61% -6.89% -14.13% 30.05% 30/04/2015
MSCI Japan Index (USD)
-6.14% 40.18% -6.31% -7.50% 20.04%
Matthews Japan Fund (GBP)
-6.68% 35.92% -1.31% -7.76% 15.25% 30/04/2015
MSCI Japan Index (GBP)
-1.64% 25.98% -1.54% -0.42% 7.00%
Matthews Japan Fund (USD Hedged)
-2.34% 55.00% -7.90% -8.73% n.a. 03/04/2017
MSCI Japan Index 100% Hedged to USD (USD Hedged)
3.11% 44.05% -6.58% -1.76% n.a.
Matthews Japan Fund (EUR Hedged)
-3.62% 52.77% -9.63% -11.48% n.a. 03/04/2017
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
2.24% 42.42% -9.35% -4.75% n.a.

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.

Portfolio Characteristics

(as of 30/04/2022)
Fund Benchmark
Number of Positions 55 260
Weighted Average Market Cap $35.2 billion $48.7 billion
Active Share 68.5 n.a.
P/E using FY1 estimates 16.6x 12.6x
P/E using FY2 estimates 16.0x 12.4x
Price/Cash Flow 11.6 9.9
Price/Book 1.9 1.3
Return On Equity 13.4 11.9
EPS Growth (3 Yr) 11.8% 0.8%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 30/04/2022)
0.67%
Alpha
0.96
Beta
95.85%
Upside Capture
95.54%
Downside Capture
0.18
Sharpe Ratio
0.03
Information Ratio
8.63%
Tracking Error
73.69

Fund Risk Metrics are reflective of Class I USD ACC shares.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 30/04/2022)
Name Sector % Net Assets
Shin-Etsu Chemical Co., Ltd. Materials 4.3
Sony Group Corp. Consumer Discretionary 3.7
ORIX Corp. Financials 3.5
Seven & i Holdings Co., Ltd. Consumer Staples 3.3
Olympus Corp. Health Care 3.2
Tokyo Electron, Ltd. Information Technology 2.8
SMC Corp. Industrials 2.8
Keyence Corp. Information Technology 2.8
Daiichi Sankyo Co., Ltd. Health Care 2.8
JSR Corp. Materials 2.8
TOTAL 32.0

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 30/04/2022)
  • Sector Allocation
  • Market Cap Exposure

Sector data based on MSCI’s revised Global Industry Classification Standards. For more details, visit www.msci.com.

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

  • OVERALL
  • 3 YEAR
  • 5 YEAR
(as of 24/01/2022)

Past performance is no guarantee of future results. High ratings and rankings does not assure favorable performance.

Overall Morningstar RatingTM is reflective of the noted 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.

Portfolio Managers

Taizo  Ishida photo
Taizo Ishida

Lead Manager

Shuntaro  Takeuchi photo
Shuntaro Takeuchi

Lead Manager

Commentary

Period ended 31 March 2022

For the first quarter of the year, the Fund returned -14.18%, while its benchmark, the MSCI Japan Index, returned -6.45% over the same period.

Market Environment:

The first quarter saw two significant trends in Japanese equity markets. Japanese stocks performed better than their international peers, excluding U.S. markets, despite the yen weakening to the lowest level since 2015. Ongoing improvements in Japan corporates’ margin capabilities and reasonable valuation levels contributed to this performance. At the same time, Japanese markets experienced a historic quarter for value style investing that was induced by the sharp repricing of bond yields. The month of January saw the largest spread between growth performance and value performance in 30 years.

Performance Contributors and Detractors:

Overall, the first three months of the year were not dissimilar to the first three months of 2021 as our focus on high-quality growth struggled amid a surge in U.S. 10-year bond yields. From a sector perspective, allocations in the key areas of information technology, health care and industrials were the largest detractors to the relative performance of the portfolio. Industrials was notably impacted due to its inclusion of commodity price-sensitive trading companies and cyclical-transport enterprises—businesses that have been challenged by surging fuel prices and supply-chain disruption. On the other hand, our overweight and stock selection in consumer staples was the largest contributor to relative performance.

From a market cap point of view, our overweight in small cap stocks—those under $3 billion—was also a detractor to performance. Our underweight and stock selection in mega cap and overweight and stock selection in mid cap stocks were also large detractors.

Turning to individual securities, technology conglomerate Sony Group Corp. was the largest detractor to Fund performance. Soon after the stock approached near all-time high prices on the second trading day of 2022 it faced profit-taking selling pressure even after reporting strong third-quarter results. Like Sony, Recruit Holdings Co., a leading HR and media marketing-solution provider, was one of the portfolio’s top contributors last year. But in the first quarter of 2022, Recruit was the second-largest detractor. Its HR Tech segment, comprising indeed.com and Glassdoor, has reported record high margins with over 40% in topline growth and so it will face tough year-over-year sales comparisons in the next fiscal year.  

On the positive side, Seven & i Holdings Co., the operator of 7-Eleven stores in Japan and the U.S., was the largest contributor to performance. We believe the company’s U.S. operation (7-Eleven Inc. and Speedway, the gas-station/convenience-store chain) will continue to benefit from high fuel prices, as well as from the group’s ability to achieve synergies and pass-through costs. Longer term, there’s also potential for improved corporate governance. Trading giant Mitsubishi Corp. was another top contributor. The company continues to benefit from high commodity prices and a weaker yen. Additionally, we think Mitsubishi will improve its focus on total shareholder return along with its investments for renewable energy.

Notable Portfolio Changes:

One significant adjustment within our portfolio is the increase in defensive sectors such as consumer staples. While we still see economic growth recovery as the world reopens from the pandemic, ongoing uncertainty over the war in Ukraine, coupled with inflation risks and a rising interest-rate environment, warrant a more balanced approach towards growth in our view.

In the first quarter, we initiated a position in NTT Data Corp., an IT service company that is benefiting from domestic government demand for digital transformation projects and restructuring efforts bearing fruit in its overseas business. We took advantage of recent market weakness which sent the shares down to lower valuation levels.

We also initiated a position in IHI Corp. We believe the heavy machinery company will benefit from an aircraft-parts recovery as economic activity reopens. We also think the company’s liquified natural gas (LNG) boilers and nuclear facility after-service businesses will gain from high energy prices.

In order to make positions for new names we exited Advantest Corp., Eisai Co., Ibiden Co., JMDC Inc., Kakaku.com Inc., Mitsui High-tec Inc., Net Protections Holdings Inc., Nintendo Co., OBIC Business Consultants Co., Sansan Inc. and Sysmex Corp.

Outlook:

2022, just like 2021, is off to a tough start for high-quality growth strategies. The velocity of the widening of growth-value spreads has made it challenging to adapt our strategy quickly. But while extremely loose monetary policy from all major central banks has come to an end and the Federal Reserve has officially started to tighten, we believe that the long-value/short-growth trade has now fully unwound back to pre-pandemic levels. And during the first quarter, growth companies continued to improve their margins and strengthen their cashflow generation abilities.

So, while we are taking a more balanced approach towards multiple stages of growth and valuation levels, we believe the earnings capability of Japanese companies has improved meaningfully over the past economic cycle, helped by productivity improvements, better corporate governance, innovation and a higher focus on capital efficiency.

For many years, Japanese equities have not been considered a place to invest but rather a place to trade in and out of. However, the dynamic has meaningfully changed since 2010 as Japanese corporates have been generating improving levels of profits in each bottom of the cycle. 2020 showed another resiliency of Japanese corporate profits. We believe Japanese equity market fundamentals have turned from pure value to cyclical growth. While many global investors are skeptical of this change, we believe that is where the investment opportunity lies.

 

Rolling 12 Month Returns For the period ended 31/03/2022 - I (Acc)
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Japan Fund (USD)
-11.08% 51.61% -6.89% -14.13% 30.05% 30/04/2015
MSCI Japan Index (USD)
-6.14% 40.18% -6.31% -7.50% 20.04%
Matthews Japan Fund (GBP)
-6.68% 35.92% -1.31% -7.76% 15.25% 30/04/2015
MSCI Japan Index (GBP)
-1.64% 25.98% -1.54% -0.42% 7.00%
Matthews Japan Fund (USD Hedged)
-2.34% 55.00% -7.90% -8.73% N.A. 03/04/2017
MSCI Japan Index 100% Hedged to USD (USD Hedged)
3.11% 44.05% -6.58% -1.76% N.A.
Matthews Japan Fund (EUR Hedged)
-3.62% 52.77% -9.63% -11.48% N.A. 03/04/2017
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
2.24% 42.42% -9.35% -4.75% N.A.

Sources: Brown Brothers Harriman (Luxembourg) S.C.A, Matthews Asia, FactSet Research Systems, Bloomberg

 

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. 

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