China’s Elevation Capital embarks on buildout
Elevation Capital, a Greater China long/short equity hedge fund manager, is building out its team in Hong Kong and its Shanghai headquarters and seeking an asset management licence in the former city.
Hedge fund veteran Yvonne Wong started in Hong Kong as chief operating officer on Monday (February 15), as Elevation looks to add investment, trading and operational talent and plans to step up its marketing effort. It already has several analysts in Shanghai.
“The plan is to grow the fund and build a rounded capability and infrastructure,” said Nathan Wang, chief executive and founder, based in Shanghai.
Before setting up Elevation in January 2015, Wang founded and was co-CIO for about a year at Magnolia Capital, another hedge fund. He left to set up his own firm because he felt it was better to be in sole control of investment decisions.
Wang has also worked as an analyst at New York-based long/short equity hedge fund Coatue and as an associate at private equity firm Bain Capital. He started his career at Morgan Stanley.
Wong (pictured left) recently returned from a four-year sabbatical for family reasons, before which she spent 17 years in financial industry roles. Most recently, she held senior posts at asset services group State Street. Prior to that, she was COO at Hong Kong-based hedge fund Thaddeus Capital. She has also held prime brokerage roles at Goldman Sachs, Morgan Stanley and Merrill Lynch.
Elevation’s fund is focused on China-driven opportunities globally – not just mainland stocks, but any parts of the global economy that are driven by Chinese factors. This would typically have meant investing in Australian mining companies or European luxury brands, said Wang, but now there is a wider range of possibilities. “China’s influence is more global than in the past,” he noted.
Short-selling is a particular focus for Elevation. “Lots of things are blessed by the 'Chinese factor' – they often boom when it comes in, but they also often suffer when it leaves,” said Wang. “For example, the tech sector or rare earth materials.”
Long/short can capture not only the upside but also the shorting opportunities driven by China-driven bubbles bursting, he added.
Asked for an example of such a play, Wang said that a consumer-sector stock he had shorted had fallen some 90% in a short period this year. “We’d been holding it for four or five months and it had cost us some pain, but we had great conviction in our call that the bubble would burst and when it burst it would fall fast.”
Elevation’s main focus markets are Hong Kong stocks and US-listed Chinese firms (via American depository receipts), but the fund also has exposure in Australia, Japan, New Zealand and elsewhere. The fund only invests in A-shares very selectively.
Wang intends to trade cash equities but not derivatives, apart perhaps from swaps or options to hedge foreign-exchange exposure. Wang said he and his team were not quants: “We like to stick to what we are good at – finding the fundamental investment story rather than making money from financial engineering or arbitrage.”
But surely it is harder to make money from – and raise money for – China strategies these days, given that it is easier for foreign investors to get mainland exposure via the expansion of cross-border schemes such as Stock Connect and mutual recognition?
Asked that question, Wang argued that there had long been competition, whether from Chinese funds or via the qualified foreign institutional investor (QFII) programme. “We don’t really think about it from a competitive point of view; we aim to stay calm and focused on what we do.”