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Matthews Emerging Markets Sustainable Future Fund
MASGX

The Matthews Asia ESG Fund won the inaugural 2021 UNCTAD Sustainable Emerging Market Fund Award. Press Release. Methodology.

Formerly known as the Matthews Asia ESG Fund.

Snapshot
  • Unconstrained strategy focused on companies that make a positive environmental, social and economic impact in emerging markets
  • 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

04/30/2015

Inception Date

6.14%

YTD Return

(as of 10/30/2024)

$13.31

NAV

(as of 10/30/2024)

-0.14

1 Day NAV Change

(as of 10/30/2024)

Objective

Long-term capital appreciation

Strategy

Under normal circumstances, the Matthews Emerging Markets Sustainable Future Fund seeks to achieve its investment objective by investing at least 80% of its net assets, which include borrowings for investment purposes, in the common and preferred stocks of companies of any market capitalization located in emerging market countries that satisfy one or more of the Fund’s environmental, social and governance (“ESG”) standards. Emerging market countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe. Certain emerging market countries may also be classified as “frontier” market countries, which are a subset of emerging market countries with newer or even less developed economies and markets, such as Sri Lanka and Vietnam.

Risks

Investments in emerging and frontier securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier markets countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. Matthews Emerging Markets Sustainable Future Fund’s consideration of ESG factors in making its investment decisions may impact the Fund’s relative investment performance positively or negatively.

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

Fund Facts
Inception Date 04/30/2015
Fund Assets $272.76 million (09/30/2024)
Currency USD
Ticker MASGX
Cusip 577-130-727
Portfolio Turnover 49.2%
Benchmark MSCI Emerging Markets Index
Geographic Focus Emerging Markets - Countries generally include every country in the world except the United States, Australia, Canada, Hong Kong, Israel, Japan, New Zealand, Singapore and most of the countries in Western Europe
Fees & Expenses
Gross Expense Ratio 1.23%

Performance

  • Monthly
  • Quarterly
  • Calendar Year
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As of 09/30/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Sustainable Future Fund - MASGX
04/30/2015
MASGX
8.32% 9.95% 11.09% 13.69% 0.03% 11.69% n.a. 7.83%
MSCI Emerging Markets Index
6.72% 8.88% 17.24% 26.54% 0.82% 6.15% n.a. 4.12%
MSCI All Country Asia ex Japan Index
8.47% 10.55% 21.52% 29.39% 0.98% 6.90% n.a. 4.73%
As of 09/30/2024
Average Annual Total Returns
Name 1MO 3MO YTD 1YR 3YR 5YR 10YR Since Inception Inception Date
Matthews Emerging Markets Sustainable Future Fund - MASGX
04/30/2015
MASGX
8.32% 9.95% 11.09% 13.69% 0.03% 11.69% n.a. 7.83%
MSCI Emerging Markets Index
6.72% 8.88% 17.24% 26.54% 0.82% 6.15% n.a. 4.12%
MSCI All Country Asia ex Japan Index
8.47% 10.55% 21.52% 29.39% 0.98% 6.90% n.a. 4.73%
For the years ended December 31st
Name 2023 2022 2021 2020 2019 2018 2017 2016
Matthews Emerging Markets Sustainable Future Fund - MASGX
MASGX
7.83% -14.38% 11.76% 42.87% 12.55% -9.73% 33.79% -1.40%
MSCI All Country Asia ex Japan Index (USD)
6.34% -19.36% -4.46% 25.36% 18.52% -14.12% 42.08% 5.76%
MSCI Emerging Markets Index (USD)
10.27% -19.74% -2.22% 18.69% 18.88% -14.24% 37.75% 11.60%

Before July 29, 2022, the Fund was managed with a different investment strategy and may have achieved different performance results under its current investment strategy from the performance shown for periods before that date.

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

Assumes reinvestment of all dividends and/or distributions before taxes. All performance quoted represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate with market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund’s fees and expenses had not been waived. Performance differences between the Institutional class and the Investor class may arise due to differences in fees charged to each class.

Additional performance, attribution, liquidity, value at risk (VaR), security classification and holdings information is available on request for certain time periods.

Growth of a Hypothetical $10,000 Investment Since Inception

(as of 06/30/2024)

Source: BNY Mellon Investment Servicing (US) Inc. All performance is in US$.

The performance data and graph do not reflect the deduction of taxes that a shareholder would pay on dividends, capital gain distributions or redemption of fund shares.

Ratings

  • OVERALL
  • out of 711 funds
  • 3 YEAR
  • out of 711 funds
  • 5 YEAR
  • out of 639 funds
  • 1 YEAR
  • 4th
  • 724 out of 775 funds
  • 3 YEAR
  • 2nd
  • 266 out of 695 funds
  • 5 YEAR
  • 1st
  • 13 out of 623 funds
  • SINCE INCEPTION
  • 1st
  • 4 out of 439 funds

Ratings agency calculation methodology

Portfolio Managers

Vivek  Tanneeru photo
Vivek Tanneeru

Lead Manager

Inbok  Song photo
Inbok Song

Co-Manager

Alex  Zarechnak photo
Alex Zarechnak

Co-Manager

Portfolio Characteristics

(as of 09/30/2024)
Fund Benchmark
Number of Positions 58 1,277
Weighted Average Market Cap $42.8 billion $158.8 billion
Active Share 95.8 n.a.
P/E using FY1 estimates 17.4x 13.3x
P/E using FY2 estimates 14.6x 11.9x
Price/Cash Flow 11.4 8.7
Price/Book 2.6 1.9
Return On Equity 12.6 15.9
EPS Growth (3 Yr) 24.0% 17.4%

Sources: Factset Research Systems, Inc.

Risk Metrics (3 Yr Return)

(as of 06/30/2024)
1.56%
Alpha
0.94
Beta
87.43%
Upside Capture
88.13%
Downside Capture
-0.32
Sharpe Ratio
0.17
Information Ratio
9.76%
Tracking Error
74.84

Fund Risk Metrics are reflective of Investor share class.

Sources: Zephyr StyleADVISOR

Top 10 Holdings

(as of 09/30/2024)
Name Sector Country % Net Assets
Meituan Class B Consumer Discretionary China/Hong Kong 8.2
JD Health International, Inc. Consumer Staples China/Hong Kong 5.7
Bandhan Bank, Ltd. Financials India 5.4
Full Truck Alliance Co., Ltd. Industrials China/Hong Kong 5.3
Shriram Finance, Ltd. Financials India 5.3
Hong Kong Exchanges & Clearing, Ltd. Financials China/Hong Kong 4.8
Legend Biotech Corp. Health Care China/Hong Kong 4.0
Samsung SDI Co., Ltd., Pfd. Information Technology South Korea 3.2
Indus Towers, Ltd. Communication Services India 2.5
Micron Technology, Inc. Information Technology United States 2.4
TOTAL 46.8

Top 10 holdings may combine more than one security from the same issuer and related depositary receipts.
Source: BNY Mellon Investment Servicing (US) Inc.

Portfolio Breakdown (%)

(as of 09/30/2024)
  • Sector Allocation
  • Country Allocation
  • Market Cap Exposure
Sector Fund Benchmark Difference
Financials 26.3 22.8 3.5
Information Technology 20.5 22.2 -1.7
Industrials 16.9 6.8 10.1
Consumer Discretionary 14.4 14.0 0.4
Consumer Staples 8.1 5.2 2.9
Health Care 5.9 3.6 2.3
Communication Services 4.9 9.4 -4.5
Real Estate 3.1 1.6 1.5
Materials 0.9 6.6 -5.7
Utilities 0.6 2.9 -2.3
Energy 0.0 4.8 -4.8
Liabilities in Excess of Cash and Other Assets -1.6 0.0 -1.6

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 42.1 27.9 14.2
India 21.9 19.5 2.4
Taiwan 9.4 17.5 -8.1
South Korea 7.2 10.4 -3.2
Brazil 5.0 4.8 0.2
Poland 2.8 0.9 1.9
United States 2.4 0.0 2.4
South Africa 2.3 3.1 -0.8
Indonesia 1.7 1.6 0.1
Romania 1.5 0.0 1.5
Saudi Arabia 1.3 3.8 -2.5
Vietnam 1.2 0.0 1.2
Philippines 0.8 0.6 0.2
Turkey 0.8 0.6 0.2
Bangladesh 0.5 0.0 0.5
Jordan 0.5 0.0 0.5
Chile 0.3 0.4 -0.1
Mexico 0.0 1.9 -1.9
Malaysia 0.0 1.5 -1.5
Thailand 0.0 1.5 -1.5
United Arab Emirates 0.0 1.2 -1.2
Qatar 0.0 0.8 -0.8
Kuwait 0.0 0.7 -0.7
Greece 0.0 0.5 -0.5
Peru 0.0 0.3 -0.3
Hungary 0.0 0.2 -0.2
Colombia 0.0 0.1 -0.1
Czech Republic 0.0 0.1 -0.1
Egypt 0.0 0.1 -0.1
Liabilities in Excess of Cash and Other Assets -1.6 0.0 -1.6

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

Equity market cap of issuer Fund Benchmark Difference
Mega Cap (over $25B) 25.2 59.1 -33.9
Large Cap ($10B-$25B) 22.1 22.6 -0.5
Mid Cap ($3B-$10B) 37.1 17.8 19.3
Small Cap (under $3B) 17.2 0.4 16.8
Liabilities in Excess of Cash and Other Assets -1.6 0.0 -1.6

Source: FactSet Research Systems.

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 Breakdown benchmark reflects the MSCI Emerging Markets Index as of 6/30/23.

Distributions

Record Date Ex, Pay and
Reinvest Date
Ordinary
Income
Short Term
Capital Gains
Long Term
Capital Gains
Total Distributions
Per Share
% of NAV Nondividend Distribution (Return of Capital)
12/13/2023 12/14/2023 $0.25011 $0.17470 $0.51859 $0.94340 7.2% N.A.
12/13/2022 12/14/2022 $0.04203 $0.06010 $0.57198 $0.67411 4.9% N.A.
12/14/2021 12/15/2021 $0.00000 $0.70374 $0.64204 $1.34578 7.8% N.A.
12/15/2020 12/16/2020 $0.00950 $0.39961 $0.43641 $0.84552 6.0% N.A.
12/16/2019 12/17/2019 $0.03010 $0.00000 $0.12078 $0.15088 1.4% N.A.

 

There is no guarantee that the Fund will pay or continue to pay distributions. 

Past performance is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost.

Commentary

Period ended September 30, 2024

Market Environment

  • Emerging markets performed well overall despite experiencing volatility related to concerns over a U.S. slowdown, China’s economic headwinds and sustainability of the artificial intelligence (AI) boom. Toward the end of the quarter, the Federal Reserve’s 50 basis point (O.50%) interest rate cut—and expectations of further cuts—helped to support market gains.
  • India’s equity market delivered a robust performance. Economic growth rates remain high and following the formation of a coalition government after the general election, there are signs that growth is becoming more balanced to include services and consumption as well as infrastructure and industry.
  • In North Asia, Taiwan’s technology-heavy market was challenged despite the potential growth opportunities that AI-linked segments offer, in part as prior performance had been strong and as questions arose over valuations. South Korea’s market underperformed against the benchmark with semiconductor stocks particularly soft. Meanwhile, China’s economy continued to struggle with weak consumer sentiment and declining property prices. Toward the end of the quarter its markets rallied after the central bank launched a broad stimulus package with measures to add liquidity, aid the property market and boost equity markets.
  • Latin America’s major markets faced their own domestic headwinds. In Mexico, uncertainty over potential policies by the new president and their impact for the private sector weighed on market performance and sentiment. Meanwhile Brazil’s equity markets posted resilient performance. However, inflation remained high and the central bank is currently in a rate-increasing cycle.

Contributors and Detractors

  • For the quarter ended September 30, 2024, the Matthews Emerging Markets Sustainable Future Fund returned 9.95%, (Investor Class) and 10.01% (Institutional Class) while its benchmark, the MSCI Emerging Markets Index, returned 8.88% over the same period.
  • On a country basis, the top three contributors to relative performance were China/Hong Kong due to an overweight allocation, India due to stock selection and South Korea due to an underweight allocation. The top three detractors were the U.S. due to an off-benchmark allocation, Taiwan due to stock selection and Thailand due to zero allocation.
  • On a sector basis, the top three contributors to relative performance were industrials, consumer staples and financials due to stock selection. The top three detractors were information technology (IT) and real estate due to stock selection and communication services due to an underweight allocation.
  • The largest contributors to absolute performance included Meituan, China’s largest food delivery service and internet platform company, JD Health International, a Chinese online healthcare platform, and Shriram Finance, an Indian financial services provider. The top three detractors included Micron Technology, a U.S. semiconductor manufacturer, M31 Technology, a Taiwanese silicon intellectual property (IP) provider, and Lam Research, a U.S. semiconductor equipment manufacturer.

Outlook

  • The Fed’s rate cut will, we think, provide an impetus for a number of central banks in emerging markets to cut their own rates which should be favorable for businesses and economies. This is a significant turning point particularly for economies in Asia in our view. Fed rate cuts typically also bring downward pressure on the U.S. dollar which is often a tailwind for emerging economies.
  • In China, it will take time to see if the stimulus measures provide a sustainable catalyst for recovery. Corporate earnings are coming through in some areas including e-commerce and internet platforms. Companies more directly tied to China’s domestic economy are facing greater challenges with margins on certain consumer sectors still under pressure.
  • In India, earnings growth is feeding through to equity returns but valuations remain expensive. Thus, finding businesses where rates of growth support valuation multiples is critical. Across emerging markets, we expect volatility to continue, particularly as we approach and pass through the U.S. election. Further out, we think  market performance will start to center around domestic economic expansion and less on specific drivers like U.S. technology-related growth.

 

View the Fund’s Top 10 holdings as of September 30, 2024. Current and future holdings are subject to change and risk.

Average Annual Total Returns - MASGX as of 09/30/2024
1YR 3YR 5YR 10YR Since Inception Inception Date
13.69% 0.03% 11.69% N.A. 7.83% 04/30/2015

All performance quoted is past performance and is no guarantee of future results. Investment return and principal value will fluctuate with changing market conditions so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the return figures quoted. Returns would have been lower if certain of the Fund's fees and expenses had not been waived. For the Fund's most recent month-end performance visit matthewsasia.com

Fees & Expenses
Gross Expense Ratio 1.23%

Investments in emerging and frontier securities may involve risks such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Additionally, investing in emerging and frontier markets countries are substantially smaller, less liquid and more volatile than securities markets in more developed markets. Matthews Emerging Markets Sustainable Future Fund’s consideration of ESG factors in making its investment decisions may impact the Fund’s relative investment performance positively or negatively.

 

Visit our Glossary of Terms page for definitions and additional information.

Index Definitions

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. Neither the funds nor the Investment Advisor accept any liability for losses either direct or consequential caused by the use of this information.

The views and opinions in the commentary were as of the report date, subject to change and may not reflect 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.