Ocean Capital navigates launch of China macro strategy

Dec 6, 2009

Initial assets are a drop in the Ocean, but former investment banker Will Li is confident that a good track record, starting amid the 2009 bull run, will attract investors.

New Hong Kong-based hedge fund manager Ocean Capital opened its first product, the Ocean Capital China Macro Fund, at the end of May 2009. So far it's been a good year to be a macro manager in Asia.

Will Li, co-founder and the strategy's portfolio manager, says that, since inception, the fund is up around 25% on monthly volatility of 4%. There has just been one down month so far, of 2%. The fund makes directional bets using Hong Kong, China and US-listed equities and China-related commodity futures.

Li's strategy is a China-focused macro fund that makes decisions based on research on economics, industry, demographics and policy.

In addition to the top-down approach, another key component of Ocean's strategy is to have a highly liquid portfolio. Its current portfolio consists of more than 60 stocks, and equity index and commodity futures. Other key components of Ocean's China macro strategy include a measured trading approach and focusing on global perspective.

The fund size at present is below $20 million, which is mostly seed capital from the founders. The capacity of the fund is between $750 million to $1 billion.

"We don't expect any significant pick-up in AUM soon, so we are hunkering down and just focusing on building track record and organisation," Li says. Once Ocean has a good track record, Li believes money will come: "It should be clear that what we have is a very scalable strategy".

Early investors are very welcome and will get preferential terms, Li adds.

Will Li's background is in investment banking, most recently at UBS and Merrill Lynch. For 10 years he concentrated on doing international IPOs for Chinese companies. His partner at Ocean Capital is Taiwan's Vince Feng, who handles strategy, risk and compliance. Feng's prior work was at Goldman Sachs, before which he was the head of the Greater China office of US private-equity fund General Atlantic for seven years.

Service providers for Ocean are Deutsche Bank as prime broker, Citi as administrator, Ernst & Young as auditors, and Simmons and Simmons as lawyers.