TOP

Matthews Asia Sustainable Future Fund

Snapshot
  • Unconstrained strategy focused on companies that make a positive environmental, social and eco­nomic impact in Asia ex Japan
  • All-cap portfolio with diversified emerging and frontier market exposures
  • Deep bottom-up fundamental approach that seeks to generate attractive long-term risk-adjusted returns by investing in well-governed companies

21/07/2022

Inception Date

n.a.

YTD Return (USD)

(as of 25/11/2022)

$9.34

NAV (USD)

(as of 25/11/2022)

-0.07

1 Day NAV Change

(as of 25/11/2022)

Objective

The Fund seeks to achieve long-term capital appreciation while investing in companies that contribute to a sustainable future.

Sustainability

The Sub-Fund has sustainable investment as its objective within the meaning of Article 9 of SFDR. In managing the Sub-Fund, the Investment Manager will apply its ESG investment guidelines further described in “General Information Relating To Sustainability” in the main part of the Prospectus.

Strategy

The Fund seeks to achieve its investment objective by investing, directly or indirectly, primarily (i.e., at least 65% of its net assets) in equities of companies located in, or with substantial ties to, the Asia ex Japan region that the Investment Manager believes contribute positively to one or more of its sustainability focus areas. On an ancillary basis, the Fund may invest in other permitted assets on a worldwide basis. For the purpose of this policy, the Asia ex Japan region consists of all countries and markets in Asia excluding Japan, but including all other developed, emerging and frontier countries and markets in Asia. The Fund seeks to invest primarily in companies that the Investment Manager believes, based on its analysis, meet the following environmental, social and governance ("ESG") standards: (1) they do not cause significant environmental or social harm; (2) they have good governance practices; and (3) they contribute to a sustainable future. In evaluating whether a company meets these ESG standards, the Investment Manager focuses on a company's contribution or potential future contribution to positive ESG outcomes based on a variety of criteria, which may include some or all of the following: climate change mitigation and adaptation, clean environment, circular economy, or sustainable production and consumption; health and well-being, human capital development, inclusive development or enablement of sustainable development; and/or good governance practices that demonstrate a strong commitment to integration of ESG principles.

Fund Facts
Inception Date 21/07/2022
Fund Assets $4.27 million (31/10/2022)
Base Currency USD
ISIN: LU2459556697 (USD) LU2459556770 (GBP)
Bloomberg Symbol MAASFIA:LX (USD) MAASFIG:LX (GBP)
Benchmark MSCI All Country Asia ex Japan Index
Geographic Focus Asia - Consists of all countries and markets in Asia, including developed, emerging, and frontier countries and markets in the Asian region
SFDR Classification Article 9
Fees & Expenses
Management Fee 0.75%

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. The Investment Manager's consideration of ESG factors in making its investment decisions materially impact the investment performance of the Fund. These and other risks associated with investing in the Fund can be found in the Prospectus.

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

Performance

  • Monthly
  • Quarterly
  • data_graph_selected Created with Sketch.
As of 31/10/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Sustainable Future Fund (USD)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 21/07/2022
MSCI All Country Asia ex Japan Index (USD)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Matthews Asia Sustainable Future Fund (GBP)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 21/07/2022
MSCI All Country Asia ex Japan Index (GBP)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
As of 30/09/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Sustainable Future Fund (USD)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 21/07/2022
MSCI All Country Asia ex Japan Index (USD)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
Matthews Asia Sustainable Future Fund (GBP)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 21/07/2022
MSCI All Country Asia ex Japan Index (GBP)
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

The Fund has commenced operations from 21 July 2022 and performance will not be shown until the fund has reached one year since inception.

Portfolio Characteristics

(as of 31/10/2022)
Fund Benchmark
Number of Positions 46 1,205
Weighted Average Market Cap $20.8 billion $77.8 billion
Active Share 95.9 n.a.
P/E using FY1 estimates 20.9x 10.4x
P/E using FY2 estimates 15.1x 10.2x
Price/Cash Flow 13.1 6.0
Price/Book 2.6 1.4
Return On Equity 5.9 14.9
EPS Growth (3 Yr) 1.7% 11.5%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 31/10/2022)
Name Sector Country % Net Assets
Legend Biotech Corp. Health Care United States 7.8
Samsung SDI Co., Ltd., Pfd. Information Technology South Korea 6.0
Full Truck Alliance Co., Ltd. Industrials China/Hong Kong 6.0
Shriram City Union Finance, Ltd. Financials India 5.9
Bandhan Bank, Ltd. Financials India 5.5
Hong Kong Exchanges & Clearing, Ltd. Financials China/Hong Kong 4.7
JD Health International, Inc. Consumer Discretionary China/Hong Kong 4.3
Phoenix Mills, Ltd. Real Estate India 4.0
Marico, Ltd. Consumer Staples India 3.7
Ecopro BM Co., Ltd. Industrials South Korea 3.6
TOTAL 51.5

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 31/10/2022)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Industrials 25.9 7.0 18.9
Financials 17.2 21.7 -4.5
Consumer Discretionary 15.9 13.5 2.4
Information Technology 15.6 22.4 -6.8
Health Care 12.7 4.3 8.4
Real Estate 6.7 3.6 3.1
Consumer Staples 3.7 5.6 -1.9
Communication Services 2.8 8.5 -5.7
Materials 0.0 5.8 -5.8
Energy 0.0 4.3 -4.3
Utilities 0.0 3.3 -3.3
Liabilities in Excess of Cash and Other Assets -0.6 0.0 -0.6

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

Country Fund Benchmark Difference
China/Hong Kong 37.2 38.7 -1.5
India 28.2 19.1 9.1
South Korea 11.6 14.1 -2.5
United States 9.8 0.1 9.7
Taiwan 8.5 15.8 -7.3
Indonesia 1.9 2.7 -0.8
Bangladesh 1.9 0.0 1.9
Singapore 0.8 4.1 -3.3
Vietnam 0.7 0.0 0.7
Thailand 0.0 2.6 -2.6
Malaysia 0.0 1.9 -1.9
Philippines 0.0 0.9 -0.9
Liabilities in Excess of Cash and Other Assets -0.6 0.0 -0.6

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 22.5 53.9 -31.4
Large Cap ($10B-$25B) 9.2 22.4 -13.2
Mid Cap ($3B-$10B) 44.7 20.2 24.5
Small Cap (under $3B) 24.2 3.5 20.7
Liabilities in Excess of Cash and Other Assets -0.6 0.0 -0.6

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.

Portfolio Managers

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Commentary

Period ended 30 September 2022

The Matthews Asia Sustainable Future Fund was launched on 21 July 2022. This is the first commentary for the Matthews Asia Sustainable Future Fund, which seeks to achieve long-term capital appreciation while investing in companies that contribute to a sustainable future.

Market Environment:

Global interest rates in general, and U.S. 10-year yields in particular, continued their northward journey in the third quarter after a strong pick up in the first two quarters of the year. U.S. 10-year yields gained about 1.25% from early August to the end of September after a worse-than-expected inflation print. China was a notable exception to this trend, where yields were lower at the end of the third quarter than at the beginning of the year due to a lack of domestic inflationary pressure and the impact of the country’s zero-COVID policy and stressed real estate market on economic activity.

Indonesia, India and Thailand were the best-performing Asian markets during the third quarter while South Korea, China and Taiwan were the worst performers. Asian currencies had a challenging quarter as continued jumbo rate rises by the Federal Reserve designed to contain inflation contributed to a very strong U.S. dollar environment. The Hong Kong dollar, Indonesian rupiah and Indian rupee were the best-performing currencies in the period while the South Korean won, Taiwanese dollar and Thai baht were the worst performers. To add perspective, some major developed market currencies, such as the British pound, the euro and the Japanese yen, fared worse than some Asian currencies during the quarter.

Performance Contributors and Detractors:

On a country basis, our stock selection in Taiwan and overweight allocation in India were the biggest contributors to relative performance since the Fund’s inception. On the other hand, our stock selection in China was the biggest detractor. Our underweight and stock selection in Singapore was also a marginal drag on performance. From a sector perspective, our stock selection in information technology and consumer discretionary were the biggest contributors to relative performance. On the flip side, stock selection in industrials and financials were the biggest detractors to relative performance.

At the stock level, our Indian holdings benefited from the normalization of economic activity in the country. Phoenix Mills, a retail mall operator, and Lemon Tree Hotels were top contributors as they gained from higher sales and stronger pricing respectively compared with pre-pandemic levels. Our Taiwan technology holdings Andes Technology and M31 Technology recovered from the sell-off earlier in the year and were also strong contributors. On the other hand, many of our key China and China-affiliated holdings, including Hong Kong Exchanges and Clearing, Full Truck Alliance and Legend Biotech Corp, were the biggest detractors. Persistent fears about softening economic activity in China tied to its zero-COVID restrictions, challenges in the country’s real-estate market and geo-political concerns over perceived closeness to Russia and ongoing frictions with the U.S. all contributed negatively to market sentiment. We continue to believe these names have potential to do well in the long term given their market positioning. In addition, as and when the zero-COVID policy normalizes over the coming quarters and economic activity rebounds, we expect market sentiment to likely improve.

Notable Portfolio Changes:

During the period we added a position in Full Truck Alliance, a leading digital-freight platform in China and the world. The company connects shippers with truckers online, enabling faster, more efficient freight order listing and matching, and creating broader access while at the same time lowering shipping costs. On the environmental side, the platform reduces carbon emissions by reducing empty miles by removing trucker trips to the logistics parks and also by ensuring that both the to-and-fro legs of a trip are laden with cargo. On the social side, Full Truck Alliance helps truckers find shipping orders faster by disintermediating several layers of middlemen while also providing assistance with smart navigation and other ancillary services. The company is in the process of recovering from the Cyberspace Administration of China’s cybersecurity review during which the company was not allowed to register new users.

We also initiated a position in Shriram City Union Finance (SCUF), one of India’s leading small and micro enterprise and two-wheeler lenders. SCUF significantly enhances access to capital in India for this underserved segment, in our view, through its explicit mission of providing financial services to this credit-starved industry. We believe SCUF has a strong competitive advantage through its geographic reach and underwriting expertise. It is also among the most well capitalized financial institutions in the country. We continue to think the company will do well over the long term following its planned merger with sister firm Shriram Transport Finance Co.

We have not exited any positions during the review period.

Outlook:

The Fed’s interest rate strategy and the market’s expectation of its evolution remain the most important variables impacting near-term regional, sector and currency performance in Asia. In addition, we are wary of the impact of the Fed’s interest rate approach on U.S. and global economic activity.

Our other key focus is on China’s zero-COVID policy and its ongoing impact on economic activity in the country. Russia’s invasion of Ukraine and its effect on energy prices (alongside OPEC’s efforts to keep the prices high) also needs careful watching. We expect corporate earnings to moderate in 2022 and we’re mindful about the impact of potentially slowing economic growth on 2023 earnings estimates. This all said, over the coming years, we expect the emerging markets gross domestic product (GDP) growth differential with developed markets to improve from a 23-year low in 2022. This, alongside relatively attractive valuations, should potentially lend support to better equity performance against developed markets compared with the last decade.

Companies that address critical challenges, such as climate change and inclusive development, will continue to thrive, in our view. And for investors interested in sustainability themes, including reducing carbon emissions, alleviating poverty and creating greater financial inclusion in the developing world, Asia remains a key investment destination. To tackle sustainable themes globally, we believe we need to include the world’s most populous economies, many of which lie in the region. As the global economy embarks on a post-pandemic recovery path and markets contend with macro headwinds and volatility, we believe there are attractive opportunities for alpha generation throughout our large, diverse, sustainable investment universe.

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. 

Index Definitions