Asset manager Cathay Conning seeks Asian growth

Cathay Conning aims to go beyond traditional clients and invest in small and mid-cap stocks

PUBLISHED : Monday, 10 December, 2012, 12:00am
UPDATED : Monday, 10 December, 2012, 6:01am

Cathay Conning Asset Management, a joint venture between Taiwan's Cathay Financial and US-based Conning Asset Management, wants to grow its Asian business out of Hong Kong by investing in Asian equities.

The fund house will have US$1 billion invested in Asian equities by the end of this year so that it can invest in new asset classes and go beyond its traditional insurance client base.

Mark Konyn, Cathay Conning's chief executive, expects its Asia-focused fund products to attract as much as US$5 billion in the next five to six years.

The fund is expanding its team of 16 people and plans to hire analysts and client relationship managers next year, according to Konyn, who was the chief executive of RCM and Allianz Global Investors for almost 15 years in Asia before joining Cathay Conning in April.

The fund house plans to allocate 20 per cent of its US$1 billion capital to Asian small- and mid-cap companies, an asset class generally regarded as volatile.

Although investors are cautious about taking on risk in this weak market environment, Konyn believes their risk appetite will pick up in the next 18 months on the back of the recovering global economy.

The small- and mid-cap sector will help the firm achieve better returns and expand its client base beyond its traditional insurance clients.

"Mid- and small-cap companies have underperformed. Relative to large-cap stocks, they are cheaper," Konyn said.

"When risk appetite improves, these stocks have a high chance of outperforming. We think it is a good opportunity to participate in that part of the market, which is highly cyclical. So this [strategy] will be pro-cyclical and this will be positive over the next three years."

The riskier asset class will help the firm reach new clients such as foundations, charities, pension funds and family offices.

The rest of the capital will be invested in high-dividend-paying companies and Chinese stocks listed in Hong Kong.

"The fund will be aimed at clients who want to capture the beta in the market and want a 2 to 3 per cent outperformance per annum, with an information ratio of about 50 per cent," Konyn said.

"We have started a high-quality Asian strategy, which is aimed at identifying companies that deploy capital efficiently and that respect minority shareholders. These are the two drivers in the portfolio."

Cathay Conning hired Timothy Matson as chief investment officer earlier this year. Matson was formerly chief investment officer at ING.

Its head of equity is Bratin Sanyal, an 18-year industry veteran who was formerly head of equity investments for ING Investment Asia-Pacific.

There are also four fund managers and analysts in its Hong Kong investment team.