Asia Growth

Matthews Japan Fund

  • 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


Inception Date


YTD Return (USD)

(as of 30/11/2021)


Price (USD)

(as of 30/11/2021)

$218.66 million

Fund Assets

(as of 31/10/2021)


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.

Fund Facts
Inception Date 30/04/2015
Fund Assets $218.66 million (31/10/2021)
Base Currency USD
ISIN: LU1220257130 (USD) LU1220257486 (GBP) LU1525503915 (USD Hedged) LU1525504053 (EUR Hedged)
Benchmark MSCI Japan Index
Geographic Focus Japan
Fees & Expenses
Management Fee 0.75%
Total Expense Ratio As of 30/09/2021 0.80% ( USD ) 0.80% ( GBP ) 0.80% ( USD Hedged ) 0.80% ( EUR Hedged )


  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
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As of 31/10/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Japan Fund (USD)
-0.65% 6.26% -0.43% 15.14% 15.29% 10.31% n.a. 9.76% 30/04/2015
MSCI Japan Index (USD)
-3.36% 2.48% 2.65% 20.26% 9.90% 8.70% n.a. 6.67%
Matthews Japan Fund (GBP)
-3.08% 7.52% -1.35% 8.32% 12.25% 7.53% n.a. 11.62% 30/04/2015
MSCI Japan Index (GBP)
-4.94% 3.94% 2.36% 13.44% 7.35% 6.22% n.a. 8.56%
Matthews Japan Fund (USD Hedged)
0.98% 10.14% 9.94% 25.46% 16.31% n.a. n.a. 13.13% 03/04/2017
MSCI Japan Index 100% Hedged to USD (USD Hedged)
-1.18% 6.50% 13.46% 31.48% 11.59% n.a. n.a. 10.79%
Matthews Japan Fund (EUR Hedged)
0.75% 9.94% 9.19% 23.96% 14.20% n.a. n.a. 10.87% 03/04/2017
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
-1.24% 6.42% 12.98% 30.34% 9.51% n.a. n.a. 8.46%
As of 30/09/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Japan Fund (USD)
3.02% 5.61% 0.22% 16.99% 10.06% 10.40% n.a. 10.01% 30/04/2015
MSCI Japan Index (USD)
2.88% 4.70% 6.22% 22.46% 7.93% 9.74% n.a. 7.33%
Matthews Japan Fund (GBP)
5.61% 8.88% 1.79% 11.53% 8.88% 9.53% n.a. 12.33% 30/04/2015
MSCI Japan Index (GBP)
5.00% 7.27% 7.68% 17.42% 6.74% 8.92% n.a. 9.54%
Matthews Japan Fund (USD Hedged)
4.94% 6.87% 8.88% 24.07% 10.42% n.a. n.a. 13.15% 03/04/2017
MSCI Japan Index 100% Hedged to USD (USD Hedged)
4.43% 5.22% 14.81% 29.68% 8.62% n.a. n.a. 11.30%
Matthews Japan Fund (EUR Hedged)
5.01% 6.85% 8.37% 22.74% 8.37% n.a. n.a. 10.90% 03/04/2017
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
4.46% 5.12% 14.39% 28.51% 6.43% n.a. n.a. 8.93%
For the years ended December 31st
Name 2020 2019 2018 2017 2016
Matthews Japan Fund (USD)
32.83% 25.54% -20.58% 33.40% 0.19%
MSCI Japan Index (USD)
14.91% 20.07% -12.58% 24.39% 2.73%
Matthews Japan Fund (GBP)
28.30% 21.61% -16.16% 21.57% 20.43%
MSCI Japan Index (GBP)
11.36% 15.44% -7.14% 13.62% 22.53%
Matthews Japan Fund (USD Hedged)
25.29% 26.94% -20.85% n.a. n.a.
MSCI Japan Index 100% Hedged to USD (USD Hedged)
10.14% 21.81% -13.31% n.a. n.a.
Matthews Japan Fund (EUR Hedged)
24.18% 23.10% -23.30% n.a. n.a.
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
8.27% 18.17% -15.92% n.a. n.a.
For the period ended 30/09/2021
Name 2021 2020 2019 2018 2017 Inception Date
Matthews Japan Fund (USD)
16.99% 24.96% -8.82% 8.21% 13.69% 30/04/2015
MSCI Japan Index (USD)
22.46% 7.31% -4.32% 10.57% 14.46%
Matthews Japan Fund (GBP)
11.53% 19.99% -3.55% 11.01% 10.01% 30/04/2015
MSCI Japan Index (GBP)
17.42% 2.29% 1.25% 13.76% 10.82%
Matthews Japan Fund (USD Hedged)
24.07% 22.09% -11.13% 11.07% n.a. 03/04/2017
MSCI Japan Index 100% Hedged to USD (USD Hedged)
29.68% 6.26% -7.00% 13.64% n.a.
Matthews Japan Fund (EUR Hedged)
22.74% 20.76% -14.15% 8.41% n.a. 03/04/2017
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
28.51% 4.24% -9.99% 10.73% 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 31/10/2021)
Fund Benchmark
Number of Positions 54 272
Weighted Average Market Cap $46.4 billion $54.5 billion
Active Share 70.1 n.a.
P/E using FY1 estimates 21.5x 15.1x
P/E using FY2 estimates 19.7x 14.1x
Price/Cash Flow 15.5 11.2
Price/Book 2.4 1.5
Return On Equity 12.3 10.6
EPS Growth (3 Yr) 11.0% -0.5%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 31/10/2021)
Upside Capture
Downside Capture
Sharpe Ratio
Information Ratio
Tracking Error

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

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 31/10/2021)
Name Sector % Net Assets
Sony Group Corp. Consumer Discretionary 4.9
Recruit Holdings Co., Ltd. Industrials 4.3
Shin-Etsu Chemical Co., Ltd. Materials 4.1
Toyota Motor Corp. Consumer Discretionary 3.7
Toyota Industries Corp. Consumer Discretionary 3.0
ORIX Corp. Financials 2.9
Hoya Corp. Health Care 2.6
JSR Corp. Materials 2.6
Ibiden Co., Ltd. Information Technology 2.6
Keyence Corp. Information Technology 2.6
TOTAL 33.3

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 31/10/2021)
  • Sector Allocation
  • Market Cap Exposure

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

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.


  • 3 YEAR
  • 5 YEAR
(as of 29/07/2021)

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


Period ended 30 September 2021

For the quarter ending 30 September 2021, the Matthews Japan Fund returned 5.61%, while its benchmark, the MSCI Japan Index, returned 4.70% over the same period.

Market Environment:

Japan equity markets continued to lag global peers earlier in the third quarter, as the county’s vaccination ratio fell behind the U.S. and Europe’s developed markets, and its state of emergency continued. In addition, Prime Minister Yoshihide Suga's approval rating, despite his efforts to secure the vaccine supply, continued to decline amid rising COVID cases during the summer.

However, as the vaccination ratio rose to a level comparable to the U.S. and Europe, and with the resignation of Prime Minister Suga in early September, the Japanese stock market saw a brief but strong rally and some reversal in global investor flow toward the end of the quarter.

Fumio Kishida has been named as Suga’s replacement as President of the Liberal Democratic Party and is serving as the incumbent Prime Minister until the next general election on October 31. Prime Minister Kishida is considered to be a consensus choice, and no major economic policy changes are expected.

Performance Contributors and Detractors:

The Matthews Japan Fund is a quality core growth portfolio with a focus on high return on assets and invested capital, cash-flow generation and medium-term (36 months) earnings momentum. Consequently, our portfolio companies naturally tend to trade at a premium valuation to the overall market average and are vulnerable to a sudden change in equity risk premiums. This happened during the first quarter amid a rapid rise in bond yields, resulting in a difficult quarter for the portfolio. Since then, the Fund has outperformed the benchmark in the second and third quarters of the year, amid an ongoing performance gap between growth and value.

Sector wise, the portfolio changes we have implemented in health care and industrials contributed the most to the Fund’s relative performance for the quarter. On the other hand, the information technology sector, which previously was the largest overweight sector, continued to be a drag despite our efforts in reducing weightings as we took profits from growth companies trading at elevated valuations.

Turning to individual securities, leading human resources and media marketing solution provider Recruit Holdings was the Fund’s top contributor, as the company has been a beneficiary of the reopening of Japan’s economic activity. Recruit’s HR Technology companies (Indeed Inc. and Glassdoor, Inc.), its crown jewels, guided for 40%-50% topline growth for the current fiscal year.

Technology conglomerate Sony Group also was a major contributor. In an era where content such as motion pictures, music and games are consumed via digital downloads, Sony’s value as a key intellectual property (IP) holder has increased in our view. Sony's current management has been proactive in securing IP assets via merger and acquisition (M&A) as well, which we view as a prudent allocation decision in incremental capital investment.

On the other hand, the largest detractor from absolute performance was SoftBank Group, a telecom and venture capital firm. SoftBank’s share price struggled amid stagnant performance of initial public offerings (IPOs) and the general risk-off mode in China weighed on sentiment as the Group invests in key growth companies in the country.

Biopharmaceutical and drug discovery platform company PeptiDream also detracted from performance during the quarter. While the company continues to collaborate with drug makers and licenses the drug discovery technologies as well as in-house development, PeptiDream’s underperformance continued to stem from multiple contractions from a very high range.

Notable Portfolio Changes:

Looking ahead, our base case scenario is that the global economy will continue its path to recovery toward pre-COVID levels and that bond yields continue to normalize. Therefore, we have continued to shift our portfolio during the quarter toward a cyclical earnings recovery, increasing our exposure to cyclical growth companies as economic activity started to bottom out and improve.

During the quarter, we participated in an IPO, Simplex Holdings, an IT solutions and service management company. The size of Japan’s workforce is starting to peak and its decline is expected to accelerate over the next 10 years. It remains as one of the lowest labor productivity countries among OECD (Organisation for Economic Co-Operation and Development) and enabling technology to improve efficiency is imminent. Japanese corporates now have record amounts of cash on balance sheets and we believe Simplex is poised to be a beneficiary of the "digital transformation" of Japanese corporates, many of which lack internal resources.

We also initiated a position in Mitsui High-Tec, a manufacturer of "motor cores," which are a key component of powertrain motors in electric vehicles (EVs). Comprising approximately 300 to 500 layers of electrical steel sheet to create stator/rotor, the company commands around 70% of global market share. We believe the tightening of environmental regulations bodes well for EV penetration, and we chose to invest in a niche, but key, EV component maker. The company has a deep moat in material science, which is hard to replicate with only a large scale investment.

To fund these positions and other new names, we exited seven positions, including Sumitomo Mitsui Financial Group, Marui Group and Fanuc Corp.


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 have historically excelled versus global peers—not only remains intact, but we think the pace of change will accelerate as this COVID-19 situation became the stress-test on the healthcare system and costs, as well as labor productivity issues in white collar jobs as more people work remotely.

For many years, Japanese equities have not been considered a place to invest, but rather a place to trade in and out of. Investors tend to buy Japan when things bottom out and improve, then get out when things start to peak. However, this dynamic has meaningfully changed since 2010 as Japanese corporates have been generating improving levels of profits in each bottom of the cycle—2020 provided another show of Japanese corporate profit resiliency. We believe Japanese equity market fundamentals have turned from pure value to cyclical growth, and many global investors are still skeptical of this change. We will continue to look for investment opportunities in high-quality companies that are able to execute well. At the same time we will also seek opportunities in cyclical areas that have a potential to achieve high growth via lower and easier competition.

Rolling 12 Month Returns For the period ended 30/09/2021 - I (Acc)
Name 2021 2020 2019 2018 2017 Inception Date
Matthews Japan Fund (USD)
16.99% 24.96% -8.82% 8.21% 13.69% 30/04/2015
MSCI Japan Index (USD)
22.46% 7.31% -4.32% 10.57% 14.46%
Matthews Japan Fund (GBP)
11.53% 19.99% -3.55% 11.01% 10.01% 30/04/2015
MSCI Japan Index (GBP)
17.42% 2.29% 1.25% 13.76% 10.82%
Matthews Japan Fund (USD Hedged)
24.07% 22.09% -11.13% 11.07% N.A. 03/04/2017
MSCI Japan Index 100% Hedged to USD (USD Hedged)
29.68% 6.26% -7.00% 13.64% N.A.
Matthews Japan Fund (EUR Hedged)
22.74% 20.76% -14.15% 8.41% N.A. 03/04/2017
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
28.51% 4.24% -9.99% 10.73% 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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