It may be a new entrant to the space, but Cathay Conning Asset Management has already amassed $1 billion of assets and its CEO has ambitious plans. He recently spoke exclusively to this publication.

Cathay Conning Asset Management may be a new kid on the Asian block, having just received its licence last February but this firm looks beyond its one year of age, already overseeing $1 billion in assets under management.

The firm is a recent joint venture between Taiwan's Cathay Financial and US-based Conning Asset Management, which between them have approximately $260 billion in global AuM – a more than comfortable platform to work from. The asset manger's speedy start has happened under the guidance of chief executive, Mark Konyn.

He joined in April 2012, bringing with him over 14 years of leadership experience from RCM, (owned by Allianz Global Investors) where he lead the Asia-Pacific investment business in Hong Kong, Japan and Australia. WealthBriefingAsia spoke with Konyn in an exclusive interview to find out what Cathay Conning has to offer, highlighting its conviction for Asian, especially Chinese, equities.

 A taste of Asia

Currently, Konyn and his team of 18 are “slowly incubating” the firm’s strategies and “building up our track record”. He spoke of three distinct strategies, each focusing on a different aspect of investing in Asia.

The first is an Asia high dividend strategy which Konyn said appeals to long term investors looking for broad-based exposure in the region, excluding Japan. It tends to cover 70-80 names, focusing on companies that can “sustain themselves through cycles and deliver shareholder value”.

Konyn and his team pinpoint such champions according to three criteria, companies that practice: “efficient deployment of capital (able to pay high dividends), good governance (broadly speaking), and related to the other two – a reasonable amount of respect to minority shareholders.”

The winning formula will enable investors to “achieve that objective of good performance through the cycle, avoid the pitfalls, and give you that broad coverage in terms of beta, with some upside performance and alpha on top,” he said.

“At the moment we’re finding opportunities that adhere to one or two, or indeed all three of these criteria , “ Konyn said, adding that certain banks and manufacturers are examples of such promising cyclical companies that are holding his attention.

Seeking alpha

The second strategy looks at Asia in terms of market capitalisation and sees Konyn take a gamble in the mid and small cap sector.

“This one [strategy] is much more cyclical and in some ways opportunistic,” he said, explaining that now is a good time for investors to get on board, to take advantage of affordable pricing, but it’s really only a two to three year window.

“It’s for investors that possibly already have exposure in the region and are looking to capitalise on the under-evaluation in the segment we’re looking at, or its for investors that have other considerations and are looking to bring alpha into their overall asset mix,” he said.

From a business point of view, this strategy has some appealing attributes because there’s not a lot of competition, according to Konyn.

“Because as soon as you do this and are any good at it, you reach the capacity of what you can invest. So if you look at very big companies, they’re not going to be very interested in this strategy because they can’t scale it,” he said.

 For Cathay Conning, the capacity is about $1.5billion and it is already 10 per cent occupied, which considering it only launched in January, is an indicator that the firm is onto a winner with this strategy.

“Investing increasingly is about being nimble, taking advantage of price anomalies and this is one we’ve identified,” Konyn said.

China conviction

The third strategy, called China Focus, has been stylised for some of Cathay Conning’s clients.

It works on bottom up basis, investing in China stocks listed in Hong Kong. It will typically cover fewer names than the other two strategies – around 40 to 50. Performance is coming very much from stock specific opportunities and will be quite fast moving in terms of some of the sectors the asset manager will look at.

“For example we’re actually now positive on some of the banks in China – that’s playing through as a strong theme,” Konyn said.

The bottom up stock-picking is combined with a “fairly fluid” top down asset allocation, “we are looking to use hedging strategies to alter the mix in the overall portfolio so that we’re not necessarily always fully exposed,” he added.

Konyn said that typical exposure in that portfolio will be about 70 per cent to the market.  “At the moment we are about 90 per cent – so you can see we’re positive on China equities …It gives you a sense of our conviction on China investments, currently.”

Asian fixed income

“I know [fixed income] is a very big sector in the wealth management market – we are monitoring it closely – 2012 was a record year for issuance in local currency and USD,” Konyn said.

However, he questioned whether investors are getting fully compensated for the risks they’re taking, referring to the many recent junk bonds issues that commanded record high prices.

“There has been a feeding frenzy in the private banking segment and on the private investor side. If you look at break down of new issues last year – about 55 per cent ended up being owned by mutual funds, private banks or private individuals,” Konyn said.

Clients

While his clients are currently only institutional investors,  the firm is talking to a  number of wealth management providers in Taiwan, acting as a sub –advisor, especially in the fixed income arena.

One step at a time Konyn cautions: “We’ve only just started. We got our licence in February [2012], we started building operations in June, we started funding our portfolios at the beginning of September. We’re only just up and running.”  Watch this space.