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APS currently manages two China long-only funds. One is an A-share fund for global investors with a long-term horizon, such as pension funds, endowments and foundations. The other, introduced last year, is offered on a private-placement basis, with a similar portfolio that mainly consists of A-shares.
ôWe thought these portfolios were so similar, why not convert one into a Greater China fund, to include stocks in Hong Kong, Taiwan and a little bit in Singapore,ö Wong says. ôAnd if we were going to do that, why not make it long/short?ö
APS has run an equity long/short strategy for five years that covers Asia ex-mainland China but includes Japan. Wong argues performance has been good, with the fund achieving absolute returns until this year, when the regionÆs stock market collapses proved too much.
This seems like a good time to market, however. The fund does have a track record, and the A-share stock market is now cheap, with market P/E having fallen to around 15x 2008 expected earnings.
The Greater China long/short fund has been running with $35 million since last year but APS never marketed it. Now it is making an effort to show it to institutional investors. Wong says APS has no target size in mind.
Wong says the fund is still above water, despite the market corrections, although June was the first month it lost money. ôWeÆve beaten the market by 300% over four years,ö he says of the firmÆs overall A-share history.
Two native Shanghainese will manage the long/short strategy: James Liu Ji and Stella Zhang Qing. They have both been running money at APS for around 12 years, first in Singapore, and now in Shanghai. The firm also has research offices in Beijing and Dongguan. ôWeÆve had a dedicated China team long before anyone could actually invest there,ö Wong says.
The Cayman Island-domiciled APS China Alpha Fund carries management and performance fees of 2% and 20%, respectively, with an 8% hurdle rate, in US dollars. UBS is its prime broker, HSBC Institutional Trust Services the administrator and Deloitte & Touche the auditor.
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