The call:
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We spent an hour on Tuesday, January 22, talking with Teresa Kong of Matthews Asia Strategic Income. The fund is about 14 months old, has about $40 million in assets, returned 13.6% in 2012 and 11.95% since launch (through Dec. 31, 2012).
Highlights include:
- this is designed to offer the highest risk-adjusted returns of any of the Matthews funds.
- the manager describes the US bond market, and most especially Treasuries, as offering “asymmetric risk” over the intermediate term. Translation: more downside risk than upside opportunity.
- given some value in having a fixed income component of one’s portfolio, Asian fixed-income offers two unique advantages in uncertain times. First, the fundamentals of the Asian fixed-income market are very strong. Second, Asian markets have a low beta relative to US intermediate-term Treasuries.
- MAINX is one of the few funds to have positions in both dollar-denominated and local currency Asian debt (and, of course, equities as well).
- in equities, Matthews looks for stocks with “bond-like characteristics.”
- most competitors don’t have the depth of expertise necessary to maximize their returns in Asia.
- TK said explicitly that they have no neutral position or target bands of allocation for anything, i.e., currency exposure, sovereign vs. corporate, or geography. They try to get the biggest bang for the level of risk across the portfolio as a whole, with as much “price stability” (she said that a couple of times) as they can muster.
 The conference call (When you click on the link, the file will load in your browser and will begin playing after it’s partially loaded.)
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