I rather like the approach of the folks at Matthews Asia funds, and own modest chunks of their Asian Growth and Income fund (MUTF:MACSX) and Asia Dividend Fund (MUTF:MAPIX). Back in November 2011 they started their first (mostly) bond fund - Asia Strategic Income Fund (MUTF:MAINX). I am appropriately cautious about investing in funds with minimal track records, but have kept my eye on it, and over the weekend spent several hours poring through the holdings in my various bond funds to see whether MAINX would provide significant diversification. Interestingly, it does.
My asset allocation is roughly 2:1 bond funds versus equities in my main IRA. I diversify across bond fund strategies by keeping significant chunks in Templeton Global Bond (MUTF:TEGBX), Pimco Total Return (MUTF:PTTDX) and Fidelity Strategic Income (MUTF:FSICX). I also have a slightly smaller chunk dedicated to emerging markets bonds, split between Fidelity New Markets Income (MUTF:FNMIX) and Pimco Emerging Markets Bond (MUTF:PEMDX). It's hard to quantify my total exposure to EM bonds because TEGBX has a bunch (all sovereigns, and a mix of currencies), PTTDX generally maintains some exposure (mostly, but not always, sovereigns), and FSICX has about 25% in its emerging markets 'sleeve' - split between corporates and sovereigns (mostly dollar-denominated).
What I particularly noticed, however, when checking through the holdings was that all of these funds were light on Asian bonds, especially corporates. MAINX, by contrast, has increased its corporate holdings over the year to 50%, versus 33% for sovereigns. It also includes 7% in income-focused equities. The other thing I particularly like is that its currency exposure is roughly 50:50 between dollar and asian currencies - not all EM, it has about 5% in the Aussie dollar. It also has almost 9% in China's Renminbi. All in all, not much overlap with my other holdings.
MAINX returned 13.62% in 2012, and with almost 2% YTD has done better than all of the others so far this year.
Given that it is still a new fund with a limited track record, I didn't go overboard, but did swap out a modest amount of my FSICX into MAINX today. Well worth checking this one out.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: Since SA doesn't seem to recognize mutual fund symbols, I am including the list of funds mentioned that I own here (as recommended by SA): MAINX, TEGBX, PTTDX, FSICX, FNMIX, PEMDX, MACSX, MAPIX.