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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

-17.48%

YTD Return (USD)

(as of 10/08/2022)

$10.34

NAV (USD)

(as of 10/08/2022)

-0.02

1 Day NAV Change

(as of 10/08/2022)

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 $58.79 million (31/07/2022)
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 0.65%
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 31/07/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund (USD)
-1.98% -8.92% -16.84% -17.43% -4.49% -1.31% n.a. 0.52% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
0.73% -1.99% -9.24% -10.23% -0.79% 1.29% n.a. 1.92%
As of 30/06/2022
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Asia Total Return Bond Fund (USD)
-4.83% -8.60% -15.16% -16.95% -3.61% -0.72% n.a. 0.78% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
-2.54% -5.70% -9.90% -10.99% -0.79% 1.32% n.a. 1.85%
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 30/06/2022
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Total Return Bond Fund (USD)
-16.95% 7.02% 0.76% 7.03% 0.64% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
-10.99% 4.27% 5.21% 9.24% 0.11%

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 31/07/2022)
10.74% Yield to Worst

Source: FactSet Research Systems, Bloomberg, Matthews Asia

Portfolio Characteristics

(as of 31/07/2022)
2.8
Modified Duration
38
Number of Positions

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

Risk Metrics (3 Yr Return)

(as of 30/06/2022)
-1.57%
Alpha
1.71
Beta
141.15%
Upside Capture
163.87%
Downside Capture
-0.42
Sharpe Ratio
-0.47
Information Ratio
6.03%
Tracking Error
77.70

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

Sources: Zephyr StyleADVISOR

Top 10 Positions

(as of 31/07/2022)
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 3.9
Tata Motors, Ltd., 5.875%, 05/20/2025 Industrial U.S. Dollar 3.5
Kasikornbank Public Co., Ltd., 5.275%, 04/14/2068 Financial Institutions U.S. Dollar 3.5
Periama Holdings LLC, 5.950%, 04/19/2026 Industrial U.S. Dollar 3.4
Wanda Properties International Co., Ltd., 7.250%, 01/29/2024 Financial Institutions U.S. Dollar 3.3
Franshion Brilliant, Ltd., 6.000%, 02/08/2026 Financial Institutions U.S. Dollar 3.3
Indonesia Government Bond, 7.000%, 05/15/2027 Treasury Indonesian Rupiah 3.1
TOTAL 39.4

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 31/07/2022)
  • Sector Allocation
  • Country Allocation
  • Currency Allocation
  • Quality Distribution
  • Asset Type Breakdown
Sector Fund
Banking 11.8
Government Owned, No Guarantee 10.9
Consumer Cyclical 10.9
Communications 9.2
Other Financial 8.7
Basic Industry 7.4
Treasury 7.0
Government Guaranteed 5.3
Technology 3.9
Cash and Other Assets, Less Liabilities 25.0

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 31.0
India 17.7
Indonesia 5.7
Thailand 5.6
Vietnam 5.3
Malaysia 3.9
New Zealand 2.1
Singapore 1.6
South Korea 1.5
Taiwan 0.6
Cash and Other Assets, Less Liabilities 25.0

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 73.3 1.6
China Renminbi 7.6 0.8
Singapore Dollar 6.9 0.1
South Korean Won 5.1 0.0
Malaysian Ringgit 4.0 0.3
Indonesian Rupiah 3.2 0.1
Quality Distribution Fund
A- 3.9
BBB 3.1
BBB- 5.6
BB+ 8.8
BB 16.9
BB- 2.7
B+ 3.5
B 0.6
B- 0.5
CCC+ 0.7
CCC 0.3
CCC- 2.6
Not Rated 25.8
Cash and Other Assets, Less Liabilities 25.0

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 51.9
Government Bonds 12.3
Convertible Bonds 10.8
Cash and Other Assets, Less Liabilities 25.0

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

Satya  Patel photo
Satya Patel

Lead Manager

Wei  Zhang photo
Wei Zhang

Co-Manager

Commentary

Period ended 30 June 2022

For the first half of 2022, the Matthews Asia Total Return Bond Fund returned -15.16%, while its benchmark, the 50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index, returned -9.90% over the same period. For the quarter ending June 30, 2022, the Fund returned -8.60%, while the benchmark returned -5.70%.

Market Environment:

The first half of the year was a challenging one for risk assets globally, and Asia fixed income was no exception. For Asian corporate bonds, the half of the year was primarily driven by the China high yield real estate sector. The resurgence of COVID-19 in April and May severely limited economic activity in China and the real estate sector saw a significant decline in sales. As COVID quarantine measures were gradually lifted in June, real estate sales recovered from the trough in April although it is relatively early to say if the recovery trend in June can be sustained in the second half of the year. Asian high yield bond performance has been volatile in recent months. Sentiment deteriorated gradually over the quarter with the average spread for Asia high yield 148 basis points (1.48%) wider on the quarter, driven mostly by changes in the China high yield real estate sector. The deterioration in the China high yield real estate sector is mainly driven by continued defaults of high yield issuers and ratings downgrade of select investment grade issuers. While we have seen macro policies on real estate continue to ease and contracted sales trough in April, the recovery has been slowed by COVID outbreaks in key major cities such as Shanghai and Beijing. We have also seen a lack of demand as buyers struggle to build confidence in the ability of many private developers to complete construction projects. The refinancing ability of issuers in the real estate sector dominate the market’s list of worries and continues to weigh on sentiment.

On interest rate and currency, the key theme has been inflation. Asia interest rates were broadly higher during the quarter along with U.S. interest rates. During the second quarter, inflation expectations were further exacerbated by high energy prices. Supply disruptions due to COVID quarantines in China also contributed to the inflationary pressure during the quarter. The latest development has caused the U.S. Federal Reserve to quicken its path of rate hikes. Higher U.S. interest rates also provided strength to the U.S. dollar, which appreciated against all Asian currencies.

Performance Contributors and Detractors:

For the first half of the year, the return for the corporate bond portion of the portfolio was driven primarily by the China high yield real estate sector. The Fund’s China portion of corporate bonds underperformed our benchmark due to overweight in China real estate and selection effect. South Korea, Singapore and Indonesia outperformed the benchmark on the back of both selection and underweight relative to the benchmark. For the first half of the year, the top two contributors in corporate bonds were the China-property developer CIFI Holdings, and Indika Energy, an energy company with operations across coal, LNG and renewables. For the first half of the year, the top three negative contributors were Times China Holding, Sino-Ocean, and KWG Group Holding. All three are China real estate developers impacted by the overall China real estate tight funding conditions.

For the first half of the year, the convertible bond portion of the portfolio was a slight detractor to performance. Among individual contributors were Baozun Inc., a Chinese online e-commerce platform primarily serving oversea clients; iQIYI Inc., a video content maker and video platform operator in China; and Luye Pharma Group, a China-based pharmaceutical company focused on orthopedics, neurology, and gastroenterology. Among negative contributors were: Kakao Corp., a South Korean operator of cross platform mobile messaging application; Nio Inc., a Chinese electric vehicle manufacturer; and Weimob Inc., a China based e-commerce solutions provider to small and medium business in China.

Notable Portfolio Changes:

During the second quarter, we exited positions that have reached our price targets or potential risks were no longer justified by the expected returns, including Cerah Capital, an exchangeable bond linked to the equity of CIMB Bank in Malaysia. We also exited Baozun as the bond reached its put date and we were able to put the bond back to the issuer.

We also adjusted the portfolio’s currency exposure to be more overweight U.S. dollar and underweight local currencies, including exiting local currency Thailand Government Bond. We believe the recent uncertainties around inflation and geopolitical risk will continue to support a strong U.S. dollar view.

Lastly, we added to convertible bond positions outside of China, including Australian accounting software company Xero Investments and Singapore based Sea Ltd., a provider of online and mobile digital content, e-commerce, and payment platforms.

Outlook:

With COVID-19 brought under control and China exiting some of its strict quarantine measures, economic activity has started to see a significant rebound during the second half of the quarter. Additional macro policy easing has continued to be rolled out. We expect the economic recovery in China to continue in the second half of the year, but a key risk would be a renewed surge in COVID-19 cases which could prompt strict lockdown measures again, severely limiting economic activity.

In the U.S., the Fed responded to the persistent high inflation with a 75 basis points (0.75%) rate hike in June. The discussion is starting to shift from containing inflation to potential policy induced recession. While supply chain disruptions are normalizing, inflation remains stubbornly high. While the Fed has expressed some confidence in bring down inflation without causing a recession, the market remains very much concerned about a recession scenario. The Fed would have a very thin margin of error in achieving the “soft landing” scenario.

With the U.S. Fed still on a rate hike path and high energy prices, we do not believe the next few quarters to be favorable to Asian local currencies and have taken additional steps to reduce the portfolio’s local currency exposure. With inflation rising in most Asian economies, we also expect most Asian central banks to raise interest rates in response. We have also adjusted the portfolio to be underweight in Asia local currency bonds.

Rolling 12 Month Returns For the period ended 30/06/2022 - I (Acc)
Name 2022 2021 2020 2019 2018 Inception Date
Matthews Asia Total Return Bond Fund (USD)
-16.95% 7.02% 0.76% 7.03% 0.64% 29/08/2014
50% Markit iBoxx Asian Local Bond Index, 50% J.P. Morgan Asia Credit Index (USD)
-10.99% 4.27% 5.21% 9.24% 0.11%

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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