Bronte launches pan-Asia long/short hedge fund
Bronte Investment ManagementÆs new hedge fund successfully navigates its first quarter in the black.
Bronte Asia Pacific Fund was launched in the summer of 2008 and has come through its first quarter in positive territory. Since its establishment on August 1, the fund is up 0.35%.
Bronte Investment Management is based in Singapore. Its CEO and portfolio manager is Paul Kitney, who is a 20-year veteran in Asian equities and has been a portfolio manager in Asia equity long/short strategies for more than six years. Before starting Bronte in spring this year, he ran a managed account for JH Whitney Investment Management, which emulated the strategy now employed at the Bronte fund.
Previously, Kitney worked in Morgan StanleyÆs proprietary trading team in New York, Tokyo and Hong Kong, also running a pan-Asian equity long/short strategy.
Completing the new team, Michael Phang is the trader and risk manager. Robyn Sim, formerly of Creo Capital, runs operations and administration. Former Abacus Capital equity analyst Irvine Chiam is an analyst, and the plan is to hire a further two analysts.
The core of the investment process is bottom-up fundamental stock picking, comprising of management interviews and financial modelling. Beforehand, the Pan-Asian universe is filtered using a liquidity threshold, a choice of core investment themes and a quantitative screen, in order to keep the names in the research list manageable.
ôOur view is that, with the exception of India, there is valuation support at the country level across the Asia-Pacific region and that countries with the highest level of policy flexibility will do comparatively well,ö says Kitney. ôAt the top of our list is China-H, because with fiscal and trade surpluses, together with moderating inflation, our view is that there is plenty of room for both monetary and fiscal stimulus. The investment areas currently of most interest for us are infrastructure, healthcare and property."
The strategy also includes a country analysis overlay. This approach naturally suits Bronte because, in addition to his equity research background, Kitney is both a trained economist and worked as a strategist (also at Morgan Stanley).
The typical Bronte portfolio consists of 50 to 80 names. Typical long and short positions are no greater than 5% and 4% of NAV respectively. Gross exposure is typically in the range of 80% to 150% and net exposure usually within -20% to +80%.
The fund operates using one of three distinct approaches to risk management depending on market conditions. This modal approach determines the ranges of both net and gross exposure that reflect both the opportunity and risk conditions. These modes are: directional long/short, capital preservation and relative value. For its first quarter it has employed its most conservative capital preservation mode, with low net exposure of +/-10% and low gross exposure of 60-80%. Now, with the perception that systemic risk has probably been averted and while valuations are still attractive, there may be scope in the near future for the fund to move towards a more directional approach
"I think the edge of our strategy lies in its versatility. Having a modal approach to risk management gives Bronte a flexible approach in different market environments," says Kitney. "My 20 years equity experience in the Japanese markets allows the fund to express views on Japan opportunistically to the same degree as a Japan-specific fund manager. Also, because my background is in both equity research and proprietary trading, that gives me the latitude to draw from experience in both investment process building and risk management."
Fees are 2% management fee and a 20% performance fee with a high-water mark. There are no lock ups and there are monthly redemptions.
BronteÆs prime broker is Credit Suisse, administrator is Citco and lawyers are Walkers, White and Case and Rajah & Tam.
Bronte does not refer to the book-writing Bronte sisters, but to Bronte Beach in the eastern suburbs of Sydney, Australia, which was the boyhood home of Paul Kitney. The beachÆs other claim to fame is that it featured in an episode of Baywatch.
Bronte Investment Management is based in Singapore. Its CEO and portfolio manager is Paul Kitney, who is a 20-year veteran in Asian equities and has been a portfolio manager in Asia equity long/short strategies for more than six years. Before starting Bronte in spring this year, he ran a managed account for JH Whitney Investment Management, which emulated the strategy now employed at the Bronte fund.
Previously, Kitney worked in Morgan StanleyÆs proprietary trading team in New York, Tokyo and Hong Kong, also running a pan-Asian equity long/short strategy.
Completing the new team, Michael Phang is the trader and risk manager. Robyn Sim, formerly of Creo Capital, runs operations and administration. Former Abacus Capital equity analyst Irvine Chiam is an analyst, and the plan is to hire a further two analysts.
The core of the investment process is bottom-up fundamental stock picking, comprising of management interviews and financial modelling. Beforehand, the Pan-Asian universe is filtered using a liquidity threshold, a choice of core investment themes and a quantitative screen, in order to keep the names in the research list manageable.
ôOur view is that, with the exception of India, there is valuation support at the country level across the Asia-Pacific region and that countries with the highest level of policy flexibility will do comparatively well,ö says Kitney. ôAt the top of our list is China-H, because with fiscal and trade surpluses, together with moderating inflation, our view is that there is plenty of room for both monetary and fiscal stimulus. The investment areas currently of most interest for us are infrastructure, healthcare and property."
The strategy also includes a country analysis overlay. This approach naturally suits Bronte because, in addition to his equity research background, Kitney is both a trained economist and worked as a strategist (also at Morgan Stanley).
The typical Bronte portfolio consists of 50 to 80 names. Typical long and short positions are no greater than 5% and 4% of NAV respectively. Gross exposure is typically in the range of 80% to 150% and net exposure usually within -20% to +80%.
The fund operates using one of three distinct approaches to risk management depending on market conditions. This modal approach determines the ranges of both net and gross exposure that reflect both the opportunity and risk conditions. These modes are: directional long/short, capital preservation and relative value. For its first quarter it has employed its most conservative capital preservation mode, with low net exposure of +/-10% and low gross exposure of 60-80%. Now, with the perception that systemic risk has probably been averted and while valuations are still attractive, there may be scope in the near future for the fund to move towards a more directional approach
"I think the edge of our strategy lies in its versatility. Having a modal approach to risk management gives Bronte a flexible approach in different market environments," says Kitney. "My 20 years equity experience in the Japanese markets allows the fund to express views on Japan opportunistically to the same degree as a Japan-specific fund manager. Also, because my background is in both equity research and proprietary trading, that gives me the latitude to draw from experience in both investment process building and risk management."
Fees are 2% management fee and a 20% performance fee with a high-water mark. There are no lock ups and there are monthly redemptions.
BronteÆs prime broker is Credit Suisse, administrator is Citco and lawyers are Walkers, White and Case and Rajah & Tam.
Bronte does not refer to the book-writing Bronte sisters, but to Bronte Beach in the eastern suburbs of Sydney, Australia, which was the boyhood home of Paul Kitney. The beachÆs other claim to fame is that it featured in an episode of Baywatch.
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