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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

2.99%

YTD Return (USD)

(as of 19/01/2021)

$18.96

Price (USD)

(as of 19/01/2021)

$138.12 million

Fund Assets

(as of 31/12/2020)

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 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 $138.12 million (31/12/2020)
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 31/03/2020 1.14% ( USD ) 1.17% ( GBP ) 1.19% ( USD Hedged ) 1.18% ( EUR Hedged )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
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As of 31/12/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Japan Fund (USD)
3.84% 16.74% 32.83% 32.83% 9.82% 12.10% n.a. 11.37% 30/04/2015
MSCI Japan Index (USD)
4.15% 15.29% 14.91% 14.91% 6.45% 9.04% n.a. 7.19%
Matthews Japan Fund (GBP)
1.27% 9.57% 28.30% 28.30% 9.36% 13.88% n.a. 13.71% 30/04/2015
MSCI Japan Index (GBP)
1.72% 9.04% 11.36% 11.36% 6.08% 10.69% n.a. 9.43%
Matthews Japan Fund (USD Hedged)
2.89% 13.96% 25.29% 25.29% 7.98% n.a. n.a. 13.38% 03/04/2017
MSCI Japan Index 100% Hedged to USD (USD Hedged)
3.22% 12.96% 10.14% 10.14% 5.16% n.a. n.a. 9.59%
Matthews Japan Fund (EUR Hedged)
2.44% 13.26% 24.18% 24.18% 5.44% n.a. n.a. 10.82% 03/04/2017
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
3.06% 12.34% 8.27% 8.27% 2.46% n.a. n.a. 6.90%
As of 31/12/2020
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Japan Fund (USD)
3.84% 16.74% 32.83% 32.83% 9.82% 12.10% n.a. 11.37% 30/04/2015
MSCI Japan Index (USD)
4.15% 15.29% 14.91% 14.91% 6.45% 9.04% n.a. 7.19%
Matthews Japan Fund (GBP)
1.27% 9.57% 28.30% 28.30% 9.36% 13.88% n.a. 13.71% 30/04/2015
MSCI Japan Index (GBP)
1.72% 9.04% 11.36% 11.36% 6.08% 10.69% n.a. 9.43%
Matthews Japan Fund (USD Hedged)
2.89% 13.96% 25.29% 25.29% 7.98% n.a. n.a. 13.38% 03/04/2017
MSCI Japan Index 100% Hedged to USD (USD Hedged)
3.22% 12.96% 10.14% 10.14% 5.16% n.a. n.a. 9.59%
Matthews Japan Fund (EUR Hedged)
2.44% 13.26% 24.18% 24.18% 5.44% n.a. n.a. 10.82% 03/04/2017
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
3.06% 12.34% 8.27% 8.27% 2.46% n.a. n.a. 6.90%
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 31/12/2020
Name 2020 2019 2018 2017 2016 Inception Date
Matthews Japan Fund (USD)
32.83% 25.54% -20.58% 33.40% 0.19% 30/04/2015
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% 30/04/2015
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. 03/04/2017
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. 03/04/2017
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
8.27% 18.17% -15.92% n.a. 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 31/12/2020)
49
Number of Securities

Source: Brown Brothers Harriman (Luxembourg) S.C.A

28.1x
P/E using FY1 estimates
26.0x
P/E using FY2 estimates
$41.0 billion
Weighted Average Market Cap

Source: FactSet Research Systems

Top 10 Holdings

(as of 31/12/2020)
Name Sector % Net Assets
Shin-Etsu Chemical Co., Ltd. Materials 5.7
Sony Corp. Consumer Discretionary 4.4
TDK Corp. Information Technology 4.1
SMC Corp. Industrials 3.8
SMS Co., Ltd. Industrials 3.3
Hoya Corp. Health Care 3.0
SoftBank Group Corp. Communication Services 2.9
Nidec Corp. Industrials 2.9
Recruit Holdings Co., Ltd. Industrials 2.8
Advantest Corp. Information Technology 2.7
TOTAL 35.6

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 31/12/2020)
  • Sector Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 24.8 14.0 10.8
Industrials 20.0 20.6 -0.6
Consumer Discretionary 16.7 18.4 -1.7
Health Care 15.0 11.3 3.7
Communication Services 7.9 9.6 -1.7
Materials 7.8 5.2 2.6
Financials 7.6 8.3 -0.7
Consumer Staples 0.0 7.6 -7.6
Real Estate 0.0 3.4 -3.4
Utilities 0.0 1.2 -1.2
Energy 0.0 0.5 -0.5
Cash and Other Assets, Less Liabilities 0.2 0.0 0.2

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 46.2 58.9 -12.7
Large Cap ($10B-$25B) 28.0 22.3 5.7
Mid Cap ($3B-$10B) 14.9 18.9 -4.0
Small Cap (under $3B) 10.8 0.0 10.8
Cash and Other Assets, Less Liabilities 0.2 0.0 0.2

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 20/07/2020)

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 ©2020 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

Co-Manager

Commentary

Period ended 30 September 2020

For the quarter ending 30 September, 2020, the Matthews Japan Fund returned 14.77%, while its benchmark, the MSCI Japan Index, returned 7.08%.

Market Environment:

Japanese equity markets slowly climbed a wall of worry in the third quarter amid occasional spikes in COVID-19 cases and weak macro economy numbers. Monetary policies around the world remains extremely accommodative, resulting in risk-taking among investors, especially in growth stocks. Japan is no exception. Japan’s central bank announced this year its plans to double exchange-traded funds (ETF) purchases. Japanese government has also passed a stimulus package that is one of the largest in terms of percentage of GDP, both headline numbers and direct spending. On the political front, long-standing Prime Minister Shinzo Abe recently stepped down to undergo treatment for ulcerative colitis. Chief Cabinet Secretary Yoshigide Suga was named as Abe’s successor. We do not expect meaningful changes to economic policy as a result of Abe’s resignation.

Performance Contributors and Detractors:

Strong stock selection during the quarter contributed to the Fund’s relative performance. From a market cap and sector perspective, stocks across all size categories contributed positively to performance. Turning to individual securities, medical platform provider M3 was a contributor to the overall performance for the quarter. Their Japan platform now covers 90% of all doctors in Japan, and the company is using the platform to expand and disrupt in areas such as CRO (contract research organization) and career development, employee recruiting and networking. Overseas markets are a meaningful part of the company’s overall revenue, with China being the largest growth driver. On the other hand, telecom carrier Nippon Telegraph and Telephone was a detractor for the quarter. Its defensive characteristics was a negative factor in an environment where investors favored riskier assets. Additionally, Yoshihide Suga, who has long been an advocate for a lower mobile phone fees, was elected Japan's new prime minister, putting additional pressure on the share price. We exited the position in the quarter.

Notable Portfolio Changes:

We initiated a new position in department store and credit card publisher Marui. While ongoing risks linger for retailers, majority of Mauri’s earnings come from credit card operations, where card usage grew amid the COVID-19 pandemic. We think these businesses are likely to regain its momentum as consumer traffic recovers. We have also re-initiated a position in medical equipment manufacturer Sysmex, which we believe has the potential to generate attractive earnings growth and gross margin improvement driven by new product launches. We also initiated a handful of other positions geared to improvements in broader macroeconomic conditions. To fund these positions, we exited several stocks, including Lasertec, Asahi Intecc, Infomart, Kao, and Nippon Telegraph and Telephone Corp. Among the positions we exited were stocks that we believed were trading at premium valuations, while their growth rates were starting to slow.

Outlook:

On a relative view, we continue to believe Japan equities are well positioned compared to other developed and emerging market peers. Japanese corporates still have record level of cash on balance sheet, which is a needed cushion to weather the current recessionary environment. On the other hand, if COVID-19 case growth subside and we see faster recovery globally, Japanese corporate profits, geared to global manufacturing activity, may benefit as well.

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. Multi-year trends such as productivity growth, health care, technology and material science innovation—where Japanese corporations excel versus global peers—remain intact. Moreover, we expect these trends will accelerate amid the ongoing COVID-19 pandemic. The pandemic has provided stress test on Japan’s health care system and costs, as well as labor productivity issues among white-collar jobs as more people work remotely.

Additionally, the orderly transition of power after the abrupt resignation of Prime Minister Shinzo Abe to the election of Yoshihide Suga is a positive for the market in our view, as it reinforced the political stability that Japan has now, which is a stark contrast to a decade ago where the country had a new prime minister almost every year. Against this backdrop, we are optimistic about the long-term growth opportunities within Japanese equities.

Rolling 12 Month Returns For the period ended 31/12/2020 - I (Acc)
Name 2020 2019 2018 2017 2016 Inception Date
Matthews Japan Fund (USD)
32.83% 25.54% -20.58% 33.40% 0.19% 30/04/2015
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% 30/04/2015
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. 03/04/2017
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. 03/04/2017
MSCI Japan Index 100% Hedged to EUR (EUR Hedged)
8.27% 18.17% -15.92% N.A. 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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