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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

-5.59%

YTD Return (USD)

(as of 03/12/2021)

$12.34

Price (USD)

(as of 03/12/2021)

$75.16 million

Fund Assets

(as of 31/10/2021)

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 $75.16 million (31/10/2021)
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
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 30/09/2021 1.08% ( USD )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
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As of 30/11/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund (USD)
-1.66% -4.67% -4.82% -2.89% 4.47% 3.65% n.a. 3.06% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
0.18% -2.20% -2.95% -1.79% 5.40% 4.31% n.a. 3.45%
As of 30/09/2021
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund (USD)
-1.84% 0.08% -1.99% 3.14% 5.18% 3.68% n.a. 3.56% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
-1.81% -0.97% -2.57% 1.04% 5.76% 3.43% n.a. 3.59%
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%
For the period ended 30/09/2021
Name 2021 2020 2019 2018 2017 Inception Date
Matthews Asia Total Return Bond Fund (USD)
3.14% 3.76% 8.72% -2.31% 5.43% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
1.04% 6.15% 10.28% -0.96% 1.05%

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.

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

 

Yield

(as of 31/10/2021)
24.51% Yield to Worst

Source: FactSet Research Systems, Bloomberg, Matthews Asia

Portfolio Characteristics

(as of 31/10/2021)
3.7
Modified Duration
47
Number of Positions

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

Risk Metrics (3 Yr Return)

(as of 31/10/2021)
-3.94%
Alpha
1.77
Beta
127.96%
Upside Capture
172.66%
Downside Capture
0.46
Sharpe Ratio
-0.11
Information Ratio
5.59%
Tracking Error
79.12

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

Sources: Zephyr StyleADVISOR

Top 10 Positions

(as of 31/10/2021)
Name Sector Currency % Net Assets
China Development Bank, 3.800%, 01/25/2036 Foreign Government Bonds China Renminbi 4.3
Viet Nam Debt & Asset Trading Corp., 1.000%, 10/10/2025 Financials U.S. Dollar 4.3
Network i2i, Ltd., 5.650%, 04/15/2068 Communication Services U.S. Dollar 4.1
Wanda Properties International Co., Ltd., 7.250%, 01/29/2024 Real Estate U.S. Dollar 3.9
Indonesia Government Bond, 7.000%, 05/15/2027 Foreign Government Bonds Indonesian Rupiah 3.7
Luye Pharma Group, Ltd., Cnv., 1.500%, 07/09/2024 Health Care U.S. Dollar 3.5
ABJA Investment Co. Pte, Ltd., 5.450%, 01/24/2028 Materials U.S. Dollar 3.5
KWG Group Holdings, Ltd., 7.400%, 01/13/2027 Real Estate U.S. Dollar 3.5
Baozun, Inc., Cnv., 1.625%, 05/01/2024 Consumer Discretionary U.S. Dollar 3.2
Periama Holdings LLC, 5.950%, 04/19/2026 Materials U.S. Dollar 3.2
TOTAL 37.2

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
  • Country Allocation
  • Currency Allocation
  • Quality Distribution
  • Asset Type Breakdown
Sector Fund
Real Estate 23.4
Foreign Government Bonds 19.0
Financials 16.4
Consumer Discretionary 10.0
Materials 6.7
Health Care 6.3
Communication Services 6.0
Energy 3.8
Information Technology 1.4
Industrials 0.5
Cash and Other Assets, Less Liabilities 6.5

"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 49.2
India 14.8
Indonesia 9.8
Thailand 6.6
Malaysia 5.7
Vietnam 4.3
Philippines 2.5
South Korea 0.7
Cash and Other Assets, Less Liabilities 6.5

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 58.6 1.9
China Renminbi 10.9 0.7
South Korean Won 7.2 0.0
Singapore Dollar 6.3 0.1
Indonesian Rupiah 5.2 0.3
Malaysian Ringgit 4.1 0.3
Philippines Peso 4.0 0.0
Thailand Baht 3.7 0.4
Quality Distribution Fund
A- 4.0
BBB+ 3.6
BBB 7.1
BBB- 4.1
BB+ 5.6
BB 15.7
BB- 13.1
B+ 6.1
B 3.3
CCC+ 1.7
Not Rated 29.1
Cash and Other Assets, Less Liabilities 6.5

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 57.9
Government Bonds 19.0
Convertible Bonds 16.6
Cash and Other Assets, Less Liabilities 6.5

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 30 September 2021

For the quarter ending September 30, 2021, the Matthews Asia Total Return Bond Fund returned 0.08%, while its benchmark, the 50% Markit iBoxx Asian Local Bond/50% J.P. Morgan Asia Credit Index, returned -0.97%.

Market Environment:

The third quarter has been a rollercoaster ride in Asian markets largely in response to policies from China. With new regulations coming out of China on education, fintech, internet platforms, online gaming, gambling and real estate, the market scrambled to price potential implications. The high frequency of new regulations has also caught the market by surprise. While any single policy change can be expected and digested by markets, this high frequency has led markets to price in the worst expectation before any proper analysis can take place. Slowdown in the real estate sector in China was another significant development. The slowdown, combined with potential failure of China Evergrande Group, one of the largest property developers in China, hurt market sentiment. On the other side of the Pacific, U.S. interest rates increased due to concerns of inflation being longer lasting than the U.S. Fed’s initial guidance and its potential response to the longer lasting inflation.

Performance Contributors and Detractors:

For the third quarter, our holdings in Huarong Finance, a large asset management company in China, was the biggest contributor to the Fund’s performance. A consortium led by CITIC Group Corp. agreed to inject capital and effectively take over the management of the institution. This resulted in a significant recovery in Huarong’s bond price. Outside of China, the Fund’s holding in Pan Brothers, an Indonesian textile manufacturer contributed to performance. The company has indicated that it remains on-track to refinance its liabilities. Thailand was also a relative positive contributor to the Fund’s performance. The Fund benefited from being underweight to the Thai baht (THB). The various COVID variants posed significant challenges to the reopening of the Thai manufacturing and tourism sectors, resulting in weaker-than-expected economic recovery and currency. THB was the worst-performing Asian currency for the quarter, returning -5.26% for the quarter.

The Fund’s performance detractors were mostly convertible bond holdings in China and South Korea. South Korean internet platform convertible bond holding Kakao Corp., was a detractor during the quarter as the South Korean financial authorities announced that they would start regulating the sales of financial products on their platforms. Due to the volatilities in the China real estate sector, several of our holdings in this sector, including Times China and Sunac China also detracted during the quarter.

Notable Portfolio Changes:

Portfolio changes during the quarter were concentrated in China. We reduced positions that have met the target yield and added to positions that represent attractive yield given the fundamental credit quality. In particular, we exited King Talent Management, the issuing entity of Far East Horizon, and Citic Telecom. We also took profits in our convertible bond position in Xero, one of the largest accounting software accounting firms in the English-speaking world based in New Zealand. We added to high quality real estate developers such as Sunac China and Times China, and initiated a position in ESR Cayman, a warehouse and logistics company. In addition to real estate, we also added to convertible bond holdings in Baozun Inc and iQIYI Inc. These issuers represent a subset of the convertible bond issuers which have strong liquidity to support debt repayment while still offering attractive yield to put. Despite the ongoing regulatory headwinds in China, we believe these issuers represent a good opportunity to capture the attractive yield even assuming zero upside to the underlying equity. In local currencies, we cut our exposure to local interest rates by selling our position in the Indonesian government bond due 2039.

Outlook:

With increasing likelihood that China is entering a period of slowdown and weaker sentiment across Asia, risks to a broad recovery have increased. We expect China to respond with increasingly easy policy by year end, as they have historically done, to offset economic weakness. This has already begun, as evidenced by the government’s directive to energy producers to “do whatever it takes” to procure energy supplies for the winter in light of global shortages. Over the coming months, we expect policy makers to turn their focus to real estate, which has been hit hard by the default of a large developer and slowing sales. This is likely to include continued injection of liquidity through People’s Bank of China’s open market operations as well as lifting of the mortgage quota which has limited mortgage lending by banks. With a myriad of countercyclical policy tools at China’s disposal, we expect a material turnaround in sentiment and real economic activity in the coming quarters in China, which should have a positive spillover effect for the rest of Asia. With policy cycles in China often leading economic cycles, we expect that turning points in China policy represent good potential opportunities to add risk and capture alpha.

Rolling 12 Month Returns For the period ended 30/09/2021 - I (Acc)
Name 2021 2020 2019 2018 2017 Inception Date
Matthews Asia Total Return Bond Fund (USD)
3.14% 3.76% 8.72% -2.31% 5.43% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
1.04% 6.15% 10.28% -0.96% 1.05%

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. 

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