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Matthews Asia Innovative Growth Fund

Snapshot
  • High-conviction, concentrated equity portfolio of innovative companies in Asia
  • All-cap fundamental approach focused on companies with unique offerings that create or expand markets
  • Capitalizing on the new economy and the rising disposable income in Asia

23/03/2021

Inception Date

4.75%

YTD Return (USD)

(as of 29/02/2024)

$6.61

NAV (USD)

(as of 29/02/2024)

+0.03

1 Day NAV Change

(as of 29/02/2024)

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 companies Asia ex Japan that Matthews Asia believes are capable of growth based on innovation, which could be innovation in products or services or in other areas, such as processes, business models, management, use of technology, or approach to creating, expanding or servicing their markets.

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, emerging and frontier market securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation, which may adversely affect the value of the Fund's assets. 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 Fund invests primarily in equity securities, which may result in increased volatility.

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

Fund Facts
Inception Date 23/03/2021
Fund Assets $14.25 million (31/01/2024)
Base Currency USD
ISIN: LU2298459939 (USD) LU2298460192 (GBP)
Bloomberg Symbol MAIGIUA:LX (USD) MAIGIAG:LX (GBP)
Benchmark MSCI All Country Asia ex Japan Index
Geographic Focus Asia Ex Japan: Consists of all countries and markets in Asia, excluding Japan but including all developed, emerging and frontier countries and markets in Asia
SFDR Classification Article 8
Fees & Expenses
Management Fee 0.75%
Total Expense Ratio As of 31/03/2022 0.90% ( USD ) 0.90% ( GBP )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
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As of 31/01/2024
Annualized Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovative Growth Fund (USD)
-2.06% 7.11% -2.06% -13.20% n.a. n.a. n.a. -15.50% 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
-5.44% 4.72% -5.44% -7.09% n.a. n.a. n.a. -9.72%
Matthews Asia Innovative Growth Fund (GBP)
-1.75% 2.75% -1.75% -15.89% n.a. n.a. n.a. -12.98% 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
-5.34% -0.21% -5.34% -10.18% n.a. n.a. n.a. -7.16%
As of 31/12/2023
Annualized Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Innovative Growth Fund (USD)
1.61% 5.52% -2.62% -2.62% n.a. n.a. n.a. -15.29% 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
3.55% 6.48% 6.34% 6.34% n.a. n.a. n.a. -8.16%
Matthews Asia Innovative Growth Fund (GBP)
1.03% 1.63% -7.94% -7.94% n.a. n.a. n.a. -12.79% 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
2.83% 1.95% 0.34% 0.34% n.a. n.a. n.a. -5.51%
For the years ended December 31st
Name 2023 2022 2021 2020 2019
Matthews Asia Innovative Growth Fund (USD)
-2.62% -24.74% n.a. n.a. n.a.
MSCI All Country Asia ex Japan Index (USD)
6.34% -19.36% n.a. n.a. n.a.
Matthews Asia Innovative Growth Fund (GBP)
-7.94% -15.66% n.a. n.a. n.a.
MSCI All Country Asia ex Japan Index (GBP)
0.34% -9.19% n.a. n.a. n.a.
For the period ended 31/12/2023
Name 2023 2022 2021 2020 2019 Inception Date
Matthews Asia Innovative Growth Fund (USD)
-2.62% -24.74% n.a. n.a. n.a. 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
6.34% -19.36% n.a. n.a. n.a.
Matthews Asia Innovative Growth Fund (GBP)
-7.94% -15.66% n.a. n.a. n.a. 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
0.34% -9.19% n.a. n.a. n.a.

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

All returns over 1 year are annualized

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 31/01/2024)
Fund Benchmark
Number of Positions 48 1,248
Weighted Average Market Cap $238.6 billion $116.8 billion
Active Share 70.6 n.a.
P/E using FY1 estimates 19.3x 12.8x
P/E using FY2 estimates 15.9x 11.3x
Price/Cash Flow 12.8 6.8
Price/Book 3.1 1.5
Return On Equity 16.5 14.2
EPS Growth (3 Yr) 18.6% 14.0%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 31/01/2024)
Name Sector Country % Net Assets
Taiwan Semiconductor Manufacturing Co., Ltd. Information Technology Taiwan 9.9
Samsung Electronics Co., Ltd. Information Technology South Korea 4.9
NVIDIA Corp. Information Technology United States 4.7
PDD Holdings, Inc. Consumer Discretionary China/Hong Kong 4.3
Reliance Industries, Ltd. Energy India 3.6
PT Bank Rakyat Indonesia Persero Tbk Financials Indonesia 3.2
Zomato, Ltd. Consumer Discretionary India 3.0
SK Hynix, Inc. Information Technology South Korea 3.0
New Oriental Education & Technology Group, Inc. Consumer Discretionary China/Hong Kong 2.9
Alchip Technologies, Ltd. Information Technology Taiwan 2.6
TOTAL 42.1

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 31/01/2024)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 38.2 25.9 12.3
Consumer Discretionary 22.6 13.3 9.3
Financials 16.0 21.1 -5.1
Industrials 7.8 7.6 0.2
Communication Services 6.5 9.1 -2.6
Energy 3.6 4.2 -0.6
Materials 1.0 4.8 -3.8
Real Estate 1.0 3.0 -2.0
Health Care 0.6 3.8 -3.2
Consumer Staples 0.0 4.7 -4.7
Utilities 0.0 2.8 -2.8
Cash and Other Assets, Less Liabilities 2.7 0.0 2.7

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

Country Fund Benchmark Difference
India 26.6 21.1 5.5
China/Hong Kong 22.5 34.6 -12.1
Taiwan 18.3 19.3 -1.0
United States 12.1 0.0 12.1
South Korea 10.9 14.4 -3.5
Indonesia 4.0 2.3 1.7
Netherlands 1.8 0.0 1.8
Brazil 1.2 0.0 1.2
Singapore 0.0 3.8 -3.8
Thailand 0.0 2.0 -2.0
Malaysia 0.0 1.6 -1.6
Philippines 0.0 0.8 -0.8
Macau 0.0 0.2 -0.2
Cash and Other Assets, Less Liabilities 2.7 0.0 2.7

Not all countries are included in the benchmark index(es).

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 66.1 56.6 9.5
Large Cap ($10B-$25B) 18.1 22.7 -4.6
Mid Cap ($3B-$10B) 12.4 18.8 -6.4
Small Cap (under $3B) 0.8 1.8 -1.0
Cash and Other Assets, Less Liabilities 2.7 0.0 2.7

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.

Sustainability-related Disclosures

This Fund Yes No
Complies with Article 8 of SFDR  
Investment process integrates ESG factors and sustainability risks based on proprietary and third-party research  
Applies norms- and activity-based exclusions  
Promotes environmental and social characteristics  
Has a sustainable investment objective  
Conducts engagement  
Exercises Voting Rights  

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 Fund’s investment objective and risk factors.

For more information, please refer to our Responsible Investment and Stewardship Policy and our ESG-Related Investment Policy of Matthews Asia Funds.

Portfolio Managers

Michael J. Oh, CFA photo
Michael J. Oh, CFA

Lead Manager

Inbok  Song photo
Inbok Song

Co-Manager

Commentary

Period ended 31 December 2023

For the year ending 31 December 2023, the Matthews Asia Innovative Growth Fund returned -2.62%, while its benchmark, the MSCI All Country Asia ex Japan Index returned 6.34%. For the fourth quarter of the year, the Fund returned 5.52% versus 6.48% for the benchmark.

Market Environment   

2023 was challenging on many levels for Asia equity markets. At the macro level, rising interest rates and a strong U.S. dollar were headwinds for the region. Growth companies were out of favor while value companies relatively outperformed. Geopolitical tensions between the U.S. and China also remained elevated, particularly in the first half, and we expect these tensions to continue. The most notable feature, however, was the prolonged weakness of the Chinese economy. The rapid post-COVID recovery that many investors expected didn’t materialize and the country instead struggled with a lack of confidence and problems in specific sectors like real estate. Mitigating China’s woes somewhat was India’s continued resilient growth, supported in part by its domestic infrastructure programs and increasing global trade. Information technology (IT) was the largest contributor to returns in the region, while communication services was among the laggards. Toward the end of the year, there was a general consensus that inflation had peaked in the global economy and that the U.S. Federal Reserve would pivot toward cutting rates in 2024 and the dollar would weaken. This provided some tailwinds across the region in the final quarter of 2023. 

Performance Contributors and Detractors   

Regionally, our stock selection in China/Hong Kong was the biggest detractor to total and relative returns in 2023. Our exposure was hurt by the much slower-than-expected recovery in China, international concerns over geopolitical risks, and regulatory uncertainties related to technology companies. Stock selection in South Korea and India detracted from relative returns as did an underweight in Taiwan which rallied last year. In India, selection was hurt by not owning more utilities and infrastructure-related names. We added more exposure to infrastructure-related companies in the last quarter. On the other hand, an off-benchmark position in the U.S. was the top contributor to relative returns. We invest in companies that are generating more than 50% of their revenue from Asia but are not necessarily based in Asia. An underweight to Thailand and lack of exposure to Malaysia also contributed.

At the sector level, stock selections in communication services and health care were the biggest detractors from relative returns. In contrast, stock selection in real estate was the top contributor; a lack of exposure to utilities and materials also contributed. 

On a company basis, PDD Holdings, the Chinese operator of the Pinduoduo e-commerce app, was the best biggest contributor to total and relative returns in 2023. PDD has been gaining market share in China and its overseas unit, Temu, has been growing rapidly. Alchip was the best performer and another big contributor to returns. The Taiwan-based provider of silicon designs and manufacturing services for the chip industry is well positioned, we believe, to benefit from on-going developments in the artificial intelligence (AI) industry. E-commerce giant Alibaba was the biggest detractor to returns and Kuaishou Technology, a video-sharing platform, also detracted. Alibaba’s topline growth slowed in 2023 and it lost market share to competitors. Kuaishou’s fundamentals are still sound in our view, but the stock has suffered amid persisting uncertainties around China’s regulatory environment.  

Notable Portfolio Changes   

We reduced our China exposure in the portfolio in a meaningful way in the last quarter as we feel the opportunity set has shrunk due to higher regulatory risks, a persisting weak domestic economy and soft consumer sentiment. Among our exits were Alibaba, digital services platform Baidu, video platform Bilibili and Kuaishou Technology. On the other hand, we added Godrej Consumer Products, an India-based consumer staples company, and Shenzhen-based BYD Company, the world’s largest maker of electric vehicles (EVs). In India, consumer staples is one area that will continue to see stable growth going forward, in our view, and Godrej Consumer Products is well positioned to benefit. BYD surpassed the EV market share of Tesla in the last quarter. We are focusing on Chinese companies with competitive international business models and BYD fits into this strategy well. 

Outlook   

Overall we’re optimistic for 2024. We pivoted during the last quarter of the year to adjust the country weightings in the portfolio to address on-going evolution in the region. China remains challenging. We believe the government is not making necessary reforms to improve its domestic economy and unless we see a firm change in policies and an improvement in the regulatory environment we will maintain a cautious view on the Chinese equity market. 

In contrast, we are optimistic on India. It doesn’t have the same issues that have negatively impacted the Chinese market and, in many ways, India has the potential to replicate the success that China has had in the past 20 years. Valuations, however, remain elevated and we will be very selective in picking our investments. 

More generally, the semiconductor industry is passing the bottom of the cycle and Asia maintains its leading edge when it comes to the foundry and the memory segments which are the backbone of the global industry. The consumer market in Asia also remains the largest and fastest growing market in the world and provides a great foundation for innovation and entrepreneurship to flourish.

Rolling 12 Month Returns For the period ended 31/12/2023 - I (Acc)
Name 2023 2022 2021 2020 2019 Inception Date
Matthews Asia Innovative Growth Fund (USD)
-2.62% -24.74% N.A. N.A. N.A. 23/03/2021
MSCI All Country Asia ex Japan Index (USD)
6.34% -19.36% N.A. N.A. N.A.
Matthews Asia Innovative Growth Fund (GBP)
-7.94% -15.66% N.A. N.A. N.A. 23/03/2021
MSCI All Country Asia ex Japan Index (GBP)
0.34% -9.19% N.A. N.A. N.A.

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

To find documents in additional languages, please visit the Fund Literature page in our Resources section.

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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