Ronnie Wu, co-founder of $800 million leading Hong Kong-based fund of hedge fund firm Vision Investment Management, has left to launch his own fund-of-hedge-funds firm, Penjing Asset Management.

The Penjing team currently stands at seven members, including ex-Vision Natalie Cruz, who takes on the role of Penjing's COO, and two members of UBS' fund of hedge funds team, Lawrence Ka and Louis Chan, who join as senior investment professionals. Wu says he has a long-standing relationship with his ex-UBS team members, and previously worked with them six years ago when he was an associate in UBS' fund of hedge funds group.

Wu says Penjing launched with $50 million to $100 million under management. Currently most of the money comes from Wu's wealthy Hong Kong family, the owners of local Wing Lung Bank. However, other family offices and personal relations have also invested.

Wu emphasizes that the fund is currently not positioning itself as a competitor to Vision. "We are not actively marketing the fund at the moment. Although many investors may know me well from my Vision days, we're focusing on keeping our head down and developing a track record."

Speaking of the Ronnie's departure, Vision's CEO Jerry Wang says, "Ronnie started his new company largely because of his obligations to his family, who were getting to the size where they needed someone to manage their wealth."

Wang stresses that Wu still remains part of the Vision business. "Ronnie continues to remain a shareholder in the Vision fund and a director of the board, although he will not be involved in the day-to-day investment decisions of the business. We see this as a change of role for him rather than turnover."

However, Wu admits that while family obligations were part of his decision to launch Penjing, he also had a philosophical difference of opinion with Wang on how the business should be grown, and on the trade-off between asset gathering and returns.

"Jerry wanted to build Vision into a fund of hedge funds powerhouse, whereas I was focused on an environment that would be most conducive to maximizing return," says Wu.

As Penjing builds up its track record and begins marketing, the firm will inevitably stand as a strong competitor to Vision, and it is possible that Wu will withdraw his investments from Vision.

Penjing's multi-strategy Asia fund of hedge funds is currently invested in 32 Asian hedge fund managers. "We take a top-down approach and focus on selecting our combination of managers to reflect our macro views," Wu explains. "We maintain a diversified portfolio to minimize business risk from individual hedge fund managers."

Commenting on the current positioning of his portfolio, Wu says, "Right now we're concerned about carry trades and strategies that are short volatility. For example we're underweight high-yield strategies, especially compared to a couple of years ago."

The fund is currently looking to increase exposure to strategies that are long volatility. "We think we are going into a different cycle now and volatility is coming back," notes Wu.

Wu says he feels comfortable with equity strategies despite the rising-rate environment, although he is concerned about developed markets such as the US and Japan where he sees stagflation setting in and the impact of rising commodity prices taking their toll.

"We're underweight Japan in our portfolio, although of the developed markets we retain a significant position in Australia, where we feel the commodity exposure is a good hedge."

Industry participants are waiting to see how Vision will fair with the absence of one of its key founders. For starters, it remains to be seen whether more of Vision's team members defect to join Penjing.

Vision was founded in June 2000, when it was one of the earliest Asian-based funds of hedge funds. The firm has been on a high growth trajectory since then, launching its Asian fund in April 2002. Vision's Asian fund, with assets of more than $300 million, has been a consistent performer and twice winner of AsianInvestor magazine's Asian fund of hedge funds award.