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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

3.73%

YTD Return (USD)

(as of 28/11/2023)

$10.00

NAV (USD)

(as of 28/11/2023)

+0.02

1 Day NAV Change

(as of 28/11/2023)

Objective

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

Sustainability

The Fund has sustainable investment as its objective within the meaning of Article 9 of SFDR. In managing the 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 $5.38 million (31/10/2023)
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
  • Rolling 12 Month
    Returns
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As of 31/10/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Sustainable Future Fund (USD)
-5.76% -14.48% -3.22% 13.09% n.a. n.a. n.a. -5.28% 21/07/2022
MSCI All Country Asia ex Japan Index (USD)
-3.86% -12.39% -3.98% 13.92% n.a. n.a. n.a. -5.45%
Matthews Asia Sustainable Future Fund (GBP)
-4.98% -9.58% -4.29% 6.89% n.a. n.a. n.a. -6.71% 21/07/2022
MSCI All Country Asia ex Japan Index (GBP)
-3.30% -7.10% -4.82% 8.09% n.a. n.a. n.a. -6.59%
As of 30/09/2023
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Sustainable Future Fund (USD)
-3.13% -1.00% 2.70% 15.25% n.a. n.a. n.a. -0.84% 21/07/2022
MSCI All Country Asia ex Japan Index (USD)
-2.65% -3.22% -0.13% 11.28% n.a. n.a. n.a. -2.68%
Matthews Asia Sustainable Future Fund (GBP)
0.21% 2.12% 0.73% 3.77% n.a. n.a. n.a. -3.11% 21/07/2022
MSCI All Country Asia ex Japan Index (GBP)
1.07% 0.81% -1.57% 1.78% n.a. n.a. n.a. -4.39%
For the period ended 30/09/2023
Name 2023 2022 2021 2020 2019 Inception Date
Matthews Asia Sustainable Future Fund (USD)
15.25% n.a. n.a. n.a. n.a. 21/07/2022
MSCI All Country Asia ex Japan Index (USD)
11.28% n.a. n.a. n.a. n.a.
Matthews Asia Sustainable Future Fund (GBP)
3.77% n.a. n.a. n.a. n.a. 21/07/2022
MSCI All Country Asia ex Japan Index (GBP)
1.78% n.a. n.a. 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 31/10/2023)
Fund Benchmark
Number of Positions 43 1,245
Weighted Average Market Cap $20.8 billion $103.8 billion
Active Share 95.8 n.a.
P/E using FY1 estimates 17.4x 12.8x
P/E using FY2 estimates 14.1x 11.2x
Price/Cash Flow 12.2 6.5
Price/Book 2.3 1.5
Return On Equity 7.8 15.4
EPS Growth (3 Yr) 35.6% 18.4%

Sources: Factset Research Systems, Inc.

Top 10 Holdings

(as of 31/10/2023)
Name Sector Country % Net Assets
Full Truck Alliance Co., Ltd. Industrials China/Hong Kong 7.7
Shriram Finance, Ltd. Financials India 7.7
Bandhan Bank, Ltd. Financials India 6.7
Legend Biotech Corp. Health Care China/Hong Kong 5.9
JD Health International, Inc. Consumer Staples China/Hong Kong 5.3
Meituan Class B Consumer Discretionary China/Hong Kong 5.1
Hong Kong Exchanges & Clearing, Ltd. Financials China/Hong Kong 4.8
Micron Technology, Inc. Information Technology United States 4.1
Samsung SDI Co., Ltd., Pfd. Information Technology South Korea 3.6
Airtac International Group Industrials China/Hong Kong 3.1
TOTAL 54.0

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 31/10/2023)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Information Technology 23.9 23.6 0.3
Financials 20.0 21.3 -1.3
Industrials 19.4 7.1 12.3
Health Care 11.3 4.1 7.2
Consumer Discretionary 9.3 14.7 -5.4
Consumer Staples 5.7 5.1 0.6
Communication Services 5.4 9.7 -4.3
Real Estate 4.7 3.1 1.6
Materials 0.0 5.1 -5.1
Energy 0.0 3.7 -3.7
Utilities 0.0 2.5 -2.5
Cash and Other Assets, Less Liabilities 0.4 0.0 0.4

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 51.2 40.4 10.8
India 22.2 18.2 4.0
Taiwan 11.2 17.2 -6.0
South Korea 7.9 13.5 -5.6
United States 4.1 0.0 4.1
Vietnam 1.8 0.0 1.8
Bangladesh 1.2 0.0 1.2
Singapore 0.0 3.8 -3.8
Indonesia 0.0 2.2 -2.2
Thailand 0.0 2.2 -2.2
Malaysia 0.0 1.7 -1.7
Philippines 0.0 0.7 -0.7
Macau 0.0 0.2 -0.2
Cash and Other Assets, Less Liabilities 0.4 0.0 0.4

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 21.1 56.4 -35.3
Large Cap ($10B-$25B) 17.6 21.5 -3.9
Mid Cap ($3B-$10B) 40.6 19.9 20.7
Small Cap (under $3B) 20.3 2.2 18.1
Cash and Other Assets, Less Liabilities 0.4 0.0 0.4

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.

ESG Characteristics

(as of 30/09/2023)
  • Business Involvement
  • Sustainability Attributes
Name Fund Benchmark Difference
Controversial Weapons
Fund Coverage: 95% Benchmark Coverage: 98%
0.0 0.5 -0.5
Tobacco
Fund Coverage: 96% Benchmark Coverage: 100%
0.0 0.4 -0.4
Alcohol
Fund Coverage: 96% Benchmark Coverage: 100%
0.0 1.3 -1.3
Gambling
Fund Coverage: 96% Benchmark Coverage: 100%
0.0 0.5 -0.5
Name Fund Benchmark Difference
UN Global Compact Violators
Fund Coverage: 100% Benchmark Coverage: 100%
0.0 0.9 -0.9
Board Diversity
Fund Coverage: 100% Benchmark Coverage: 98%
19.8 17.7 2.1

Board Diversity: Represents the weighted average ratio of female board members in investee companies.
Tobacco: Represents companies that generate revenue from tobacco manufacturing or production or that generate more than 50% of revenue from tobacco retail.
UN Global Compact Violators: Represents companies that have been assessed as failing to comply with the 10 United Nations Global Compact Principles by ISS-ESG Norms-Based Research. Different ESG research providers may come to different conclusions on the severity of the violation.
Alcohol: Represents companies that generate revenue from alcohol manufacturing or production.
Gambling: Represents companies that generate more than 50% of revenue from gambling.
Controversial weapons include companies with involvement in the following: anti-personnel mines; biological and chemical weapons; cluster weapons; depleted uranium; nuclear weapons and white phosphorus. A company is excluded if it is directly involved in the production, selling and/or distribution of (parts of) controversial weapons and this involvement concerns the core weapon system, or components/services of the core weapon system that are tailor-made and essential for the lethal use of the weapon.

Source: Sustainalytics, Factset, MSCI, Matthews Asia.

GHG Intensity

(as of 30/09/2023)

Fund Coverage: 100%; Benchmark Coverage: 97% as of 30/09/2023

GHG Intensity: Represents the normalized portfolio’s total weighted average (scope 1 + scope 2) carbon emissions intensity, using the most recently available data (emissions data from 2020, 2021). Carbon intensity represents the issuer’s total carbon emissions per EUR million of revenue (tCO2e divided by EUR million in revenue).

Source: Sourced from ISS ESG. Where not covered by external data providers, we have tried to source these data points.

Sustainability-related Disclosures

This Fund Yes No
Complies with Article 9 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

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Inbok  Song photo
Inbok Song

Co-Manager

Commentary

Period ended 30 September 2023

For the quarter ending 30 September 2023, the Matthews Asia Sustainable Future Fund returned -1.00%, while its benchmark, the MSCI All Country Asia ex Japan Index, returned -3.22%.

Market Environment:

During the quarter, U.S. 10-year bond yields rose meaningfully on market concerns over interest rates staying higher for longer. With materially higher yields on offer, equity market relative valuations in relation to bonds deteriorated, leading to weak equity market performance toward the end of the quarter. Oil prices also firmed up on the back of concerted efforts by OPEC to cut supplies.

India was the best-performing major market in the region during the quarter while Malaysia, a smaller market, did even better. South Korea, Taiwan and China/Hong Kong were the worst-performing major markets while the Philippines and Indonesia also posted declines. From a sector perspective, energy and consumer discretionary were the best-performing sectors while real estate and information technology (IT) were the worst performers.

From a currency perspective, only the Hong Kong dollar in the region appreciated against the U.S. dollar during the quarter. The Chinese renminbi, Malaysian ringgit and the Indian rupee, which all depreciated against the dollar, were among the other best-performing currencies on a relative basis. The Taiwanese dollar, the Indonesian Rupiah and the Thai Baht were among the worst performers.

Performance Contributors and Detractors:

From a country perspective, our stock selection and overweight to India, and stock selection and underweight to Taiwan and South Korea were the biggest contributors to relative performance in the period. On the other hand, our stock selection in China was the biggest detractor from relative performance.

At the sector level, stock selections in industrials, financials, health care and real estate were the top contributors to relative performance. In contrast, an underweight and stock selection in consumer discretionary and stock selection in information technology (IT) and consumer staples were the biggest detractors. Our lack of exposure to energy also detracted.

From a stock perspective, Ecopro BM was the biggest contributor to total and relative returns in the period. The South Korean cathode maker gained on the back of strong contract backlog buildup on account of orders from U.S. original equipment manufacturers (OEM) to South Korean battery cell makers. We significantly trimmed our position during the quarter as the stock performed very well. Elite Material, a Taiwanese maker of key raw materials that go into printed circuit boards used in AI servers, was also a top contributor.

In contrast, Samsung SDI, a South Korean battery maker, was the biggest detractor to total and relative returns in the quarter on near-term worries about potential weakness in European electric vehicle (EV) sales in general and in sales of the company’s key customers in particular. We continue to take a positive view of the long-term technological capabilities and prospects of Samsung SDI’s business. JD Health, a leading Chinese online pharmacy and medical services player, was also a large detractor amid general softness in the large-cap China internet space over concerns about weak consumer confidence. The stock also experienced a negative high-base effect from its strong performance in the second half of 2022. We expect a gradual recovery in Chinese economic fundamentals and consumer confidence and expect JD Health to do well over the long term. China-based Flat Glass fell on the back of general weakness in the solar-supply chain amid market concerns over the 2024 demand outlook following better-than-expected 2023 demand out of China, and the pace of capacity addition in the industry. We remain positive on the long-term growth prospects for the industry and Flat Glass’s leadership position within it.

Notable Portfolio Changes:

There were no additions during the quarter. We exited small positions in Summarecon Agung, an Indonesian property developer, and CSPC Pharmaceutical, a Chinese pharmaceutical company, as we found better use of capital elsewhere.

Outlook:

The Federal Reserve’s interest rate strategy and expectation of its evolution were the most important variables impacting the performance of emerging markets over the last few quarters. Notwithstanding the recent increase in 10-year bond yields, we believe the Fed is near or at the end of the interest rate hiking cycle so the focus will now shift to assessing the cumulate impact of all the rate hikes on economic growth prospects over the coming quarters.

Our focus on the end of 2023 and into 2024 will be on assessing how China’s economic recovery and growth prospects play out and how they might affect the dynamics of other emerging markets. In addition, OPEC’s efforts to keep oil prices high will require ongoing, careful monitoring.

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 reached in 2022. This, alongside relatively attractive valuations, should potentially lend support to better equity performance against developed markets compared with the last decade.

Finally, we view sustainable investing as a synonym for long-term investing. Our approach focuses on investing in companies that are well-positioned to embrace global, multidecadal trends, including addressing critical challenges like climate change and inclusive development. These companies also often tend to be good in identifying and proactively addressing long-terms risk to their businesses. Emerging markets, we believe, are key destinations for sustainable investment themes that offer attractive opportunities for alpha generation.

Rolling 12 Month Returns For the period ended 30/09/2023 - I (Acc)
Name 2023 2022 2021 2020 2019 Inception Date
Matthews Asia Sustainable Future Fund (USD)
15.25% N.A. N.A. N.A. N.A. 21/07/2022
MSCI All Country Asia ex Japan Index (USD)
11.28% N.A. N.A. N.A. N.A.
Matthews Asia Sustainable Future Fund (GBP)
3.77% N.A. N.A. N.A. N.A. 21/07/2022
MSCI All Country Asia ex Japan Index (GBP)
1.78% N.A. 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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