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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

-14.45%

YTD Return (USD)

(as of 05/12/2022)

$10.72

NAV (USD)

(as of 05/12/2022)

+0.10

1 Day NAV Change

(as of 05/12/2022)

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, 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. 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.

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

Fund Facts
Inception Date 29/08/2014
Fund Assets $55.20 million (31/10/2022)
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 0.55%
Total Expense Ratio As of 31/03/2022 1.03% ( USD )

Performance

  • Monthly
  • Quarterly
  • Calendar Year
  • Rolling 12 Month
    Returns
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As of 31/10/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund (USD)
-5.11% -7.39% -22.98% -23.72% -7.37% -3.16% n.a. -0.43% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
-2.29% -7.26% -15.83% -15.55% -3.71% -0.36% n.a. 0.93%
As of 30/09/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund (USD)
-3.24% -4.33% -18.83% -20.61% -5.29% -2.03% n.a. 0.21% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
-4.35% -4.40% -13.86% -14.07% -2.68% 0.13% n.a. 1.22%
For the years ended December 31st
Name 2021 2020 2019 2018 2017 2016 2015
Matthews Asia Total Return Bond Fund (USD)
-4.13% 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)
-2.80% 7.95% 10.18% -0.60% 8.39% 3.79% -0.05%
For the period ended 30/09/2022
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Total Return Bond Fund (USD)
-20.61% 3.14% 3.76% 8.72% -2.31% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
-14.07% 1.04% 6.15% 10.28% -0.96%

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 31/10/2022)
14.07% Yield to Worst

Source: FactSet Research Systems, Bloomberg, Matthews Asia

Portfolio Characteristics

(as of 31/10/2022)
2.6
Modified Duration
35
Number of Positions

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

Risk Metrics (3 Yr Return)

(as of 31/10/2022)
-1.29%
Alpha
1.51
Beta
127.17%
Upside Capture
147.56%
Downside Capture
-0.75
Sharpe Ratio
-0.56
Information Ratio
6.46%
Tracking Error
70.97

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

Sources: Zephyr StyleADVISOR

Top 10 Positions

(as of 31/10/2022)
Name Sector Currency % Net Assets
China Development Bank, 3.800%, 01/25/2036 Agency China Renminbi 5.4
Viet Nam Debt & Asset Trading Corp., 1.000%, 10/10/2025 Agency U.S. Dollar 5.3
Network i2i, Ltd., 5.650%, 04/15/2068 Industrial U.S. Dollar 4.7
ABJA Investment Co. Pte, Ltd., 5.450%, 01/24/2028 Industrial U.S. Dollar 3.8
Tata Motors, Ltd., 5.875%, 05/20/2025 Industrial U.S. Dollar 3.6
Kasikornbank Public Co., Ltd., 5.275%, 04/14/2068 Financial Institutions U.S. Dollar 3.5
Shriram Transport Finance Co., Ltd., 4.400%, 03/13/2024 Financial Institutions U.S. Dollar 3.4
Periama Holdings LLC, 5.950%, 04/19/2026 Industrial U.S. Dollar 3.2
Franshion Brilliant, Ltd., 6.000%, 02/08/2026 Financial Institutions U.S. Dollar 3.1
Axis Bank, Ltd./Gift City, 4.100%, 09/08/2026 Financial Institutions U.S. Dollar 3.0
TOTAL 39.0

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 31/10/2022)
  • Sector Allocation
  • Country Allocation
  • Currency Allocation
  • Quality Distribution
  • Asset Type Breakdown
Sector Fund
Banking 20.4
Communications 10.8
Government Owned, No Guarantee 10.5
Consumer Cyclical 10.3
Basic Industry 7.1
Other Financial 6.9
Government Guaranteed 5.3
Technology 3.9
Finance Companies 3.4
Cash and Other Assets, Less Liabilities 21.5

Cash and Other Assets may include the mark-to-market value of forward currency exchange contracts and certain derivative instruments.
Sector data based on Bloomberg B Class Sector.
Source: Bloomberg.

By issuer's country of risk Fund
China/Hong Kong 30.0
India 26.0
Thailand 7.5
Vietnam 5.3
Singapore 3.0
Indonesia 2.5
New Zealand 2.1
South Korea 1.6
Taiwan 0.6
Cash and Other Assets, Less Liabilities 21.5

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 85.4 1.8
China Renminbi 7.6 0.7
Singapore Dollar 7.0 0.1
Quality Distribution Fund
BBB- 6.8
BB+ 8.6
BB 15.5
BB- 12.2
B+ 4.1
B- 0.6
CCC+ 0.5
CCC 0.2
CCC- 2.5
Not Rated 27.5
Cash and Other Assets, Less Liabilities 21.5

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 61.4
Convertible Bonds 11.9
Government Bonds 5.3
Cash and Other Assets, Less Liabilities 21.5

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 ©2022 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

Satya  Patel photo
Satya Patel

Lead Manager

Wei  Zhang photo
Wei Zhang

Co-Manager

Commentary

Period ended 30 September 2022

For the quarter ending 30 September 2022, the Matthews Asia Total Return Bond Fund returned -4.33%, while its benchmark, the 50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index, returned -4.40%.

Market Environment:

For Asian corporate bonds, third quarter return was once again primarily driven by China high yield real estate sector. The sector continues to experience high volatility and deterioration in confidence, occasionally punctuated by news of additional policy support. Overall sentiment deteriorated over the quarter with average spread for Asia high yield 197 basis points (1.97%) wider on the quarter. The deterioration in China high yield real estate sector was mainly driven by continued news of liquidity shortages in various industry operators and ratings downgrade of select investment grade issuers. While we have seen macro policies on real estate to continue to ease and contracted sales rebound in September, the recovery is slowed by COVID prevention measures as well as decreased buyer confidence. Continued lack of liquidity for the entire sector pressure yields higher.

On interest rate and currency, the key theme remained inflation. Asia interest rates were broadly higher during the quarter along with U.S. interest rate. While the U.S. Federal Reserve made stronger commitments to rein in inflation, and anchor long-term inflation expectations, it remained elevated in part due to high energy prices, supply disruptions and increased inflation from service sectors. Higher U.S. interest rate and geopolitical uncertainties also provided strength to the U.S. dollar which appreciated against all Asian currencies.

Performance Contributors and Detractors:

During the quarter, return for the corporate bond portion of the portfolio was driven primarily by China high yield real estate sector. The Fund’s China portion of the corporate bonds underperformed the benchmark due to our overweight in China real estate and selection effect. Indonesia outperformed the benchmark on the back of better selection relative to the benchmark. Within the corporate bonds, the top three contributors were Indonesian textile manufacturer PB International, India based auto-manufacturer Tata Motors, and India based telecommunications company Bharti Airtel. On the other hand, the top negative detractors were Chinese real estate developers that have up until now avoided the majority of sell off in China real estate sector: Sino Ocean, and China Jinmao Holdings. China based AMC Huarong Finance was also one of the top three detractor due to sell off in China during the quarter.

The convertible bond portion of the portfolio was additive to the Fund’s performance. Top three contributors were: Luye Pharma Group, Iqiyi Inc, and Kaokao Corp. Luye Pharma is a Chinese pharmaceutical company. Iqiyi is a video content maker and video platform operator in China. Kaokao Corp. is a Korean payment and e-commerce platform. On the other hand, the top detractors were: Weimob Investment Ltd, Sea Ltd, and United Microelectronics. Weimob Investment Ltd is a China based provider of cloud-based commerce and market solutions. Sea Ltd is a company that provides online person computer and mobile digital content and e-commerce. United Microelectronics is a Taiwan based integrated circuits designer and manufacturer.

Notable Portfolio Changes:

During the quarter, we reduced our exposure to local currency bonds and exited positions where potential risks no longer justified the expected returns. For example, we exited Malaysia Government bond to reduce local currency exposure. We believe the recent uncertainties around inflation and geopolitical risk will continue to support a strong U.S. dollar view. We also exited the convertible bond of Meituan, an China based online food delivery platform, as the bond potential expected return diminished.

On the flip side, we added to contingent convertible bond positions of banks outside of China including Krung Thai Bank, a state-owned commercial bank with main operations in Thailand and HSBC Holdings, a global financial holding company that offers wide range of financial services.

We believe these offers attractive yield with low interest rate duration exposure.

The portfolio currently is underweight in both currency exposure and duration in most Asian local currencies.

Outlook:

Looking ahead, with more targeted supportive policies rolled out for the Chinese real estate sector, we expect situation on-the-ground in China to gradually improve. While the entire real estate sector is experiencing difficulty in accessing new funding, we recognize the significance of the sector relative to the Chinese overall economy. Moreover, the sector will continue to rely heavily on non-state owned operators to fulfill future demand. As such, we believe the current market price is overly pessimistic on the future of the sector. China COVID prevention measures is another important piece of the puzzle. We have seen prevention measures gradually decreased which should argue for a more conducive environment to restart normal economic activity and ease supply chain bottlenecks.

With the U.S. Fed still on a rate hike path and with sustained high energy prices, we do not believe the next few quarters to be favorable to Asian local currencies. With inflation rising in most Asian economies, we expect to see most Asian central banks continue to raise interest rate in response.

Rolling 12 Month Returns For the period ended 30/09/2022 - I (Acc)
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Total Return Bond Fund (USD)
-20.61% 3.14% 3.76% 8.72% -2.31% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
-14.07% 1.04% 6.15% 10.28% -0.96%

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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