TOP
Asia Fixed Income

Matthews Asia Total Return Bond Fund

The Fund's name changed from the Matthews Asia Strategic Income Fund to the Matthews Asia Total Return Bond Fund on 25 May 2020.

Snapshot
  • Unconstrained, total return strategy seeking high, risk-adjusted returns through credit, currencies and interest rates
  • Fundamental, bottom-up investment process to generate alpha
  • Designed to comple­ment an emerging market or international fixed income strategy and augment allocation to Asia

Read important information and other investment disclosures

29/08/2014

Inception Date

-1.91%

YTD Return (USD)

(as of 24/06/2021)

$12.82

Price (USD)

(as of 24/06/2021)

$76.66 million

Fund Assets

(as of 31/05/2021)

Objective

Total return over the long term with an emphasis on income.

Strategy

Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 65% of its total assets, which include borrowings for investment purposes, in income-producing securities including, but not limited to, debt and debt-related instruments issued by governments, quasi-governmental entities, supra-national institutions, and companies in Asia. Investments may be denominated in any currency, and may represent any part of a company’s capital structure from debt to equity or with features of both.

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. Fixed income investments are subject to additional risks, including, but not limited to, interest rate, credit and inflation risks. The Fund may invest in the following: derivatives which can be volatile and affect Fund performance; high yield bonds (junk bonds) which can subject the Fund to substantial risk of loss; and structured investments which can change the risk or return, or replicate the risk or return of an underlying asset. 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 risks associated with investing in the Fund can be found in the prospectus.

Fund Facts
Inception Date 29/08/2014
Fund Assets $76.66 million (31/05/2021)
Base Currency USD
ISIN: LU1061983224 (USD)
Bloomberg Symbol MSIFIAU:LX (USD)
Benchmark 50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index Markit iBoxx Asian Local Bond Index
Geographic Focus Asia: Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region
Fees & Expenses
Management Fee 0.65%
Total Expense Ratio As of 31/03/2021 1.25% ( USD )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
  • data_graph_selected Created with Sketch.
  • bar_graph_selected Created with Sketch.
As of 31/05/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund (USD)
1.11% -0.85% -2.37% 11.15% 3.80% 5.06% n.a. 3.67% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
0.80% 0.39% -1.26% 6.68% 5.81% 4.70% n.a. 3.98%
Markit iBoxx Asian Local Bond Index (USD)
1.12% 0.55% -1.98% 7.80% 5.54% 4.81% n.a. 3.35%
As of 31/03/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund (USD)
-1.63% -3.14% -3.14% 17.11% 2.63% 4.96% n.a. 3.65% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
-1.31% -2.93% -2.93% 8.79% 4.76% 4.23% n.a. 3.81%
Markit iBoxx Asian Local Bond Index (USD)
-2.20% -4.66% -4.66% 8.53% 3.90% 3.78% n.a. 3.01%
For the years ended December 31st
Name 2020 2019 2018 2017 2016 2015
Matthews Asia Total Return Bond Fund (USD)
6.09% 12.31% -4.02% 9.06% 8.83% -1.03%
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
7.95% 10.18% -0.60% 8.39% 3.79% -0.05%
Markit iBoxx Asian Local Bond Index (USD)
9.55% 8.99% -0.44% 11.04% 1.73% -2.88%
For the period ended 31/03/2021
Name 2021 2020 2019 2018 2017 Inception Date
Matthews Asia Total Return Bond Fund (USD)
17.11% -6.73% -1.02% 9.03% 8.05% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
8.79% 2.05% 3.57% 4.48% 2.40%
Markit iBoxx Asian Local Bond Index (USD)
8.53% 1.74% 1.59% 7.28% 0.02%

Source: Brown Brothers Harriman (Luxembourg) S.C.A., Index data from iBoxx (Markit).

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.

Effective May 25, 2020, the Fund changed its benchmark to a blended benchmark comprised of 50% Markit iBoxx Asian Local Bond Index (ALBI) and 50% J.P. Morgan Asia Credit Index (JACI). Prior to that, the Fund's benchmark was the Markit iBoxx Asian Local Bond Index. Matthews believes that the blended benchmark is more appropriate in light of the Fund's current investment strategy.

As of May 1, 2016, the HSBC Asian Local Bond Index became the Markit iBoxx Asian Local Bond Index.

Yield

(as of 31/05/2021)
8.65% Yield to Worst

Source: FactSet Research Systems, Bloomberg, Matthews

Portfolio Characteristics

(as of 31/05/2021)
4.1
Modified Duration
50
Number of Positions

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

Top 10 Positions

(as of 31/05/2021)
Name Sector Currency % Net Assets
China Development Bank, 3.800%, 01/25/2036 Foreign Government Bonds China Renminbi 4.1
Viet Nam Debt & Asset Trading Corp., 1.000%, 10/10/2025 Financials U.S. Dollar 4.1
Network i2i, Ltd., 5.650%, 04/15/2068 Communication Services U.S. Dollar 4.0
Wanda Properties International Co., Ltd., 7.250%, 01/29/2024 Real Estate U.S. Dollar 4.0
Luye Pharma Group, Ltd., Cnv., 1.500%, 07/09/2024 Health Care U.S. Dollar 3.5
Indonesia Government Bond, 7.000%, 05/15/2027 Foreign Government Bonds Indonesian Rupiah 3.5
Times China Holdings, Ltd., 6.200%, 03/22/2026 Real Estate U.S. Dollar 3.5
ABJA Investment Co. Pte, Ltd., 5.450%, 01/24/2028 Materials U.S. Dollar 3.3
Sino-Ocean Land Treasure III, Ltd., 4.900%, 03/21/2068 Real Estate U.S. Dollar 3.2
CIFI Holdings Group Co., Ltd., 6.700%, 04/23/2022 Real Estate China Renminbi 3.1
TOTAL 36.3

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 31/05/2021)
  • Sector Allocation
  • Country Allocation
  • Currency Allocation
  • Quality Distribution
  • Asset Type Breakdown
Sector Fund
Real Estate 24.9
Financials 22.1
Foreign Government Bonds 19.8
Consumer Discretionary 7.2
Communication Services 6.9
Materials 6.4
Health Care 4.9
Energy 3.7
Information Technology 0.8
Industrials 0.5
Cash and Other Assets, Less Liabilities 2.7

"Foreign Government Bonds" category includes supranationals.
Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.

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

By issuer's country of risk Fund
China/Hong Kong 49.4
India 14.4
Indonesia 10.0
Thailand 9.4
Malaysia 5.6
Vietnam 4.1
Philippines 2.6
South Korea 1.0
New Zealand 0.8
Cash and Other Assets, Less Liabilities 2.7

Not all countries are included in the benchmark index. Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.
Supranational is an international organization in which member states transcend national boundaries, (ex. IMF).

Currency Fund Contribution To Duration
U.S. Dollar 53.0 2.2
China Renminbi 11.6 0.6
South Korean Won 7.7 0.0
Singapore Dollar 6.4 0.0
Indonesian Rupiah 5.9 0.3
Malaysian Ringgit 4.3 0.4
Thailand Baht 3.9 0.5
Philippines Peso 3.8 0.0
Indian Rupee 3.4 0.0
Quality Distribution Fund
A- 4.1
BBB+ 3.7
BBB 7.9
BBB- 0.4
BB+ 4.8
BB 17.3
BB- 22.1
B+ 6.5
B 3.8
CCC+ 1.3
Not Rated 25.5
Cash and Other Assets, Less Liabilities 2.7

Credit quality is provided for the underlying bond holdings of the Fund and does not include common equities, cash and other assets and percentage values will not total 100%. Credit quality rating symbols reflect that of S&P and generally credit ratings range from AAA (highest) to D (lowest). When ratings from Moody's, S&P and Fitch are available for a bond in the Fund, the middle rating of the three is used. When two ratings are available, the lowest rating is used. When only one rating is provided, that one is used. Foreign government bonds without a specific rating are assigned the country rating provided by one of the three agencies. Securities that are not rated by any one of the three agencies are reflected as such.
Sources: FactSet Research Systems, Moody's, S&P and Fitch

Asset Type Fund
Corporate Bonds 65.5
Government Bonds 19.8
Convertible Bonds 12.0
Cash and Other Assets, Less Liabilities 2.7

Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.

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

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

Teresa  Kong, CFA photo
Teresa Kong, CFA

Lead Manager

Satya  Patel photo
Satya Patel

Co-Manager

Wei  Zhang photo
Wei Zhang

Co-Manager

Commentary

Period ended 31 March 2021

For the quarter ending March 31, 2021, the Matthews Asia Total Return Bond Fund returned -3.14% (I ACC) and -3.12% (I Dist), while its benchmark, the 50% Markit iBoxx Asian Local Bond/ 50% J.P. Morgan Asia Credit Index returned -2.93%.

Market Discussion:

The markets started 2021 ebullient. Over the last couple of quarters, the market euphoria was finally matched in part by a recovery in the real economy. The COVID lockdowns were easing (albeit sporadically), vaccine rollouts looked finally to be on track and additional fiscal stimulus was forthcoming in the U.S. The global economy was recovering at a steady pace with Global Purchasing Manufacturing Index hitting 53.9 in February 2021—the highest level since early 2018. What was more, rates were low, pushing investors into riskier asset classes for return and justifying higher valuations. However, the first quarter became somewhat of a pivot. As the economy recovered, inflation also started to tick up. From pure base effects driven by the collapse in oil prices in March 2020, we should see Consumer Price Index (measure of average change in prices that consumers pay for a basket of goods and services) rise globally starting in March of 2021. Fears of rising inflation, and what the Fed might do in response to it, began to circulate. This drove up U.S. rates, with the 10-year Treasury yields rising by 83 basis points (0.83%)—a dramatic push higher. Part of the Goldilocks conditions was eroding. Volatility picked up and equity markets sold-off for much of March.

Taken together, the losing asset classes in the first quarter were bonds, especially high-duration bonds and local currencies, whose carry (or short-term interest rate differential relative to the U.S.) declined as U.S. rates rose. Within Asian bonds, high yield outperformed investment grade and U.S. dollar bonds outperformed local bonds. Asset classes with positive correlation to inflation led returns, such as equities and commodities. Within equities, a dramatic rotation took place with value stocks outperforming growth stocks.

Performance Contributors and Detractors:

In general, the slight underperformance to the benchmark can be accounted for by the overweight in Indonesian and Malaysian local bonds, which suffered from rising rates and general currency weakness versus the dollar. Our underweight in U.S. dollar and local currency duration were contributors to performance, and provided some shelter in the rising rate environment in the first quarter.

Within U.S. dollar-denominated bonds, the biggest contributors included convertible bonds, such as Chinese pharmaceutical company Luye Pharma and Daum, the issuing entity of Kakao, a Korean online messaging and e-commerce platform. The biggest detractor came from PB International (Pan Brothers), an Indonesian textile manufacturer, which is currently in negotiations with bankers to roll over maturing bank loans.

Notable Portfolio Changes:

Throughout the quarter, we gradually reduced the overweight in Asian currencies across the board, bringing the portfolio to a neutral U.S. dollar position. As U.S. rates rise, local currency should suffer as carry is reduced and we thought an adjustment in consideration of this fact was appropriate.

We added to duration in China because we believe there was sufficient yield cushion to weather rising rates.

In terms of corporates, we exited Poseidon Finance and Syngenta as these positions approached our price targets and from the potential forced divestment as Executive Order 13959 (EO) came into enforcement. The EO targeted Chinese State-Owned Enterprises tied to the military as potential targets of divestment but interpretation could be broadened to include partial subsidiaries of name entities. We reinvested proceeds in Chinese tech convertible bonds, such as NIO, Baozun, Pinduoduo, and iQiyi, because we felt that there was value emerging after a sell-off in Chinese tech names. We also added three banks, Kasikornbank, Krung Thai Bank, and , which should benefit from cyclical upturns in Asia.

Outlook:

As real activity recovers, we’d expect cyclical growth to outpace secular growth. Value sectors of the market should see bigger improvements in revenue and financial performance. As such, we believe Asian high yield corporates stand to gain the most within Asian fixed income, as the asset class is comprised mostly of cyclical sectors—manufacturing, commodities, industrials and financials. These should be the top beneficiaries of an upswing in global economic activity.

The biggest risk is still rising rates, especially a sudden acceleration in rates driven by a surprise policy move. As the economy recovers, inflation should naturally recover and we’d expect rates to rise in pace with rising activity. This is good. After all, rates are still low and still have ample room to rise. The biggest risk is an impatient Fed, which forces rates higher. This is not our base case since Fed Chair Powell has consistently signaled that the Fed will remain patient and allow the economy to run hot before beginning the tightening process. We believe that when the time comes, the Fed will take care to normalize policy in a gradual and well-telegraphed way.

In Asia, we expect to see relatively muted movements in interest rates for most countries. After having reduced interest rates in most Asia countries, we believe some Asia central banks are taking a wait and see approach before thinking about raising the interest rate.

To summarize, we believe that an overweight in high yield corporates is the best strategy for the environment we are in—one of rising cyclical activity and rising risk-free rates. We remain short duration relative to the benchmark. Within local currency bonds, we believe some Asian bonds can outperform U.S. rates, although this requires more careful selection as carry cushions have declined.

 

Rolling 12 Month Returns For the period ended 31/03/2021 - I (Acc)
Name 2021 2020 2019 2018 2017 Inception Date
Matthews Asia Total Return Bond Fund (USD)
17.11% -6.73% -1.02% 9.03% 8.05% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
8.79% 2.05% 3.57% 4.48% 2.40%
Markit iBoxx Asian Local Bond Index (USD)
8.53% 1.74% 1.59% 7.28% 0.02%

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

The Matthews Asia Total Return Bond Fund S Acc JPY Share Class commenced operations on 22 March 2021, and performance will not be shown until the share class has reached one year. 

 

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. 

Index Definitions