Dragon Global Investors, a San Francisco-based global equity long/short fund launched last year, plans to significantly increase its portfolio allocation to Asia. Hinson Ng, Dragon's CIO, says that Asia currently makes up about 30% of the portfolio, but will quickly rise to 40%.
"Global growth has returned in a sustainable way and Asia is well poised to benefit from this" he says. "We see Asia picking up on the export as well as the domestic demand side."
Ng sees the regional financial services industry as one of the main beneficiaries of Asian growth and will be investing in the region's quality banks. The boost in mainland tourism to Hong Kong is another one of his favoured themes.
"The increased spending power and mobility of mainland tourists will have knock on effects for retail companies and the commercial real estate sector in Hong Kong," says Ng.
However, he is weary of the region's tech sector, particularly the semiconductor companies that have recently come under pricing pressure. "Many are too dependent on exports and the continued buoyancy of US domestic demand," he says.
"Geographically, the fund will be increasing exposure to the Southeast Asian markets, especially Malaysia; India as well as to the greater China region. We also think that Japan has finally turned a corner"
Malaysian-born Ng is well connected in the region, particularly as he is intimately related to senior members of government in Singapore. He is also an old Asia investment hand. His past experiences include managing emerging market and global funds for international institutions such as Barclay's Global Investors in San Francisco, CSFB in Singapore and Sassoon in Hong Kong. However, he says it was during his stint with Keppel in the mid-90s in Singapore, that he had his first foray in absolute return products, developing Keppel's pilot in-house proprietary long/short fund.
"Asian clients have understood the concept of absolute return for a long time, they have been very focused on seeing positive returns in all market environments." says Ng.
Despite his Asian routes, Ng prefers to describe himself as an international person. A UK qualified barrister who received his MBA from INSEAD, Ng speaks four languages and has lived on every continent bar Africa.
"It is this combination of a global cultural background, as well as in-depth industry experience that is present in each of Dragon's team members, and is key to supporting our truly global investment strategy," says Ng.
Dragon's five-member team includes a senior analyst from a $1 billion US hedge fund and a risk director who has also been head of risk management at a large US broker dealer. Ng is currently on the lookout to add another team member who will be dedicated to marketing.
How does such a small team implement a 'truly global' investment strategy? Ng says that Dragon has a dynamic and time efficient investment process that makes this possible.
"We look for catalysts that will drive stock prices. There is no point investing in a stock that other people are not looking at," says Ng. "Our investment process is flexible and nimble. We look at fundamentals, technical and timing, as well as macro factors. In particular, we seek to identify the key factors that are relevant at any one point in time."
Ng says that the current outlook is defensive and value oriented. The fund is increasing their focus on big and mid cap blue chip companies. However, he emphasises that they are quick to react to relevant factors. For example, despite its blue chip status, Dragon recently dumped its entire holding of HSBC stock when the bank's recent report revealed that it drew most of its profits from its domestic US banking arm.
Ng says that the Dragon Global Growth Fund targets a return of 12%-15% per annum, with volatility on the lower end of the range. He describes most of his investors as 'very high net worth individuals with an Asian background.' Ng has received significant interest from institutional investors, including an Asian-based fund of funds. He also hopes his experience and connections in Singapore will attract the attention of Singapore's Government Investment Corporation, which has been selectively investing in single-manager hedge funds.