The fund:

Manager:

The call:

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:

1. this is designed to offer the highest risk-adjusted returns of any of the Matthews funds. 
2. 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. 
3. 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. 
4. 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). 
5. in equities, Matthews looks for stocks with “bond-like characteristics.” 
6. most competitors don’t have the depth of expertise necessary to maximize their returns in Asia. 
7. 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.)

The profile:

MAINX offers rare and sensible access to an important, under-followed asset class. The long track record of Matthews’ funds suggests that this is going to be a solid, risk-conscious and rewarding vehicle for gaining access to that class.

The Mutual Fund Observer profile of MAINX, updated March, 2012

The MAINX audio profile

Web:

Matthews Asia Strategic Income Fund

Fact Sheet

2013 Q3 Report

Fund Commentary

Fund Focus: Resources from other trusted sources

The fund:

Manager:

The call:

Highlights of the call:

In December 2012, we spoke with Matt and Dan about the River Road Long Short Strategy, which is also used in this fund. With regard to the strategy, they noted:

• they believe they can outperform the stock market by 200 bps/year over a full market cycle. 
• they believe they can keep beta at 0.3 to 0.5. They have a discipline for reducing market exposure when their long portfolio exceeds 80% of fair value. 
• risk management is more important than return management, so all three of their disciplines are risk-tuned. 
• River Road is committed to keeping the strategy open for at least 8 years.
• The fund might be considered an equity substitute. Their research suggests that a 30/30/40 allocation (long, long/short, bonds) has much higher alpha than a 60/40 portfolio.

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.)

The profile:

Long/short investing makes great sense in theory but, far too often, it’s dreadful in practice.  After a year, ARLSX seems to be getting it right and its managers have a pretty cogent explanation for why that will continue to be the case.

The Mutual Fund Observer profile of ARLSX, dated June 2012.

The ARLSX audio profile

Web:

For information about the Aston mutual fund, subadvised by River Road, please see the following:

Aston Asset Management

2013 Q3 Report

Fact Sheet

ARLSX Profile Sheet

Fund Focus: Resources from other trusted sources

The fund:

Manager:

The call:

For about an hour on November 29th, Mitch Rubin, manager of RiverPark Long/Short Opportunity(RLSFX) fielded questions from Observer readers about his fund’s strategy and its risk-return profile.  Nearly 60 people signed up for the call.

The call starts with Morty Schaja, RiverPark’s president, talking about the fund’s genesis and Mr. Rubin talking about its strategy.  After that, I posed five questions of Rubin and callers chimed in with another half dozen. I’d like to especially thank Bill Fuller, Jeff Mayer and Richard Falk for the half dozen really sharp, thoughtful questions that they posed during the closing segment.

Highlights of the conversation:

• Rubin believes that many long/short mutual fund managers (as opposed to the hedge fund guys) are too timid about using leverage.
• He believes long/short managers as a group are too skittish.  They obsess about short-term macro-events (the fiscal cliff) and dilute their insights by trying to bet for or against industry groups (by shorting ETFs, for example) rather than focusing on identifying the best firms in the best industries.
• RiverPark benefits from having followed many of their holdings for nearly two decades, following their trajectory from promising growth stocks (in which they invested), stodgy mature firms (which they’d sold) and now old firms in challenged industries (which they short).

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.)

The profile:

All long-short funds have about the same goal: to provide a relatively large fraction of the stock market’s long-term gains with a relatively small fraction of its short-term volatility.  They all invest long in what they believe to be the most attractively valued stocks and invest short, that is bet against, the least attractively valued ones.  Many managers imagine their long portfolios as “offense” and their short portfolio as “defense.”

That’s the first place where RiverPark stands apart.  Mr. Rubin intends to “always play offense.”  He believes that RiverPark’s discipline will allow him to make money, “on average and over time,” on both his long and short portfolios.

The Mutual Fund Observer profile of RLSFX, dated August, 2012

The audio profile

Web:

RiverPark Funds Website

2013 Q3 Report

RLSFX Fact Sheet

Fund Focus: Resources from other trusted sources

The fund:

Manager:

The call:

For about an hour on September 13th, David Sherman of Cohanzick Management, LLC, manager of RiverPark Short Term High Yield (RPHYX) fielded questions from Observer readers about his fund’s strategy and its risk-return profile. Somewhere between 40-50 people signed up for the RiverPark call.

Highlights include:

1. they expect to be able to return 300 – 400 basis points more than a money market fund
2. they manage to minimize risk, not maximize return
3. they do not anticipate significant competition for these assets
4. expenses are unlikely to move much
5. NAV volatility is more apparent than real – by any measure other than a money market, it’s a very steady NAV. 

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.)

The profile:

People are starting to catch on to RPHYX’s discrete and substantial charms.  Both the fund’s name and Morningstar’s assignment of it to the “high yield” peer group threw off some potential investors.  To be clear: this is not a high yield bond fund in any sense that you’d recognize.

The Mutual Fund Observer profile of RPHYX, updated October, 2012

The audio profile

Web:

RiverPark Funds Website

2013 Q3 Report

RPHYX Fact Sheet

Fund Focus: Resources from other trusted sources