A team of ex-Wallenberg family office investment professionals, led by Alexander West in Hong Kong, has launched an Asia ex-Japan equity long/short fund. West worked with the Wallenberg team from 1993 to 2000 and was based in Hong Kong as head of the group's Asian investment team from 1996.
He spearheaded the fund's introduction two months ago with $10 million of partners' money under management. A European institutional investor who has known the team since its Wallenberg days will invest another $10 million of seed capital shortly.
As West explains, "The European investor will also assist us with capital raising. We expect to gain most of our early investments from European investors, progressing to US investors over time."
At current levels of market liquidity, he expects the fund to have a capacity of $250-300 million. In the two months since its launch the Blue Pool fund has gained a little over 2%.
West says the fund is targeting a gross return of about 2% a month, or an annual return of 15%-20% net of fees. "While we keep a watch on volatility, our overall objective is to maximize return" he says. "As we generate significant value by investing in mid cap stocks, we do sometimes have to tolerate volatility."
The fund takes a fundamental bottom-up stock picking approach to the Asia ex-Japan region. "Our fund will tend to be long-biased, as we're bullish on the Asian region in the long run. But we'll use a futures overlay to reduce market risk and currency exposure as well as short individual stocks," he comments.
"We've had a lot of experience working together running money in an absolute return framework from our days at Wallenberg. Moreover, our team members come from mixed backgrounds including public and private equity experience. The private equity experience is particularly relevant for the due diligence we conduct on mid cap companies we invest in."
West says the fund currently has a positive outlook on the tech sector, which he predicts will pick up during the year, as well as on Thailand, where he feels that financial stocks will be good performers.
"In general we're finding value across the region in the mid cap sector," he says. West is negative on the Hong Kong real estate sector, as he expects interest rates to rise in 2005.
He feels that China might revalue its currency in 2005, but does not think this will affect the Hong Kong peg, and has positioned his fund accordingly.
The fund has selected Merrill Lynch as its prime broker and HSBC as the fund administrator.