Former Goldman bankers market China fund

Hong Kong-based Ginger Capital set to begin formal marketing after launching last year with over $100 million.

Ginger Capital, a Greater China hedge fund set up by ex-Goldman bankers Xu Yanping and Christine Fu, together with ex-China Everbright's Ding Yi, is planning to begin marketing. The Hong Kong based fund was launched in June 2004 with a hefty $120 million under management.

Portfolio manager Ding says the initial capital was raised mainly from the team's contacts and relationships with high net-worth individuals in Asia. The team has recently begun actively marketing the fund, which currently stands at over $130 million.

During the last six months of 2004, Ginger returned around 15%. The fund is targeting an annual return in excess of 15% per annum while managing volatility at about 5%.

"We'll look to soft close at around $250 million," he says. "However as the market expands we'll probably be targeting a fund size of $500 million over a three-to-five year horizon."

He feels the fund is in a strong position to raise further capital thanks to the collective expertise of the six-member strong Ginger team, its existing assets under management, recent performance and the operational systems in place. Ginger CEO Xu spent six years at Goldman Sachs managing over $500 million for ultra-high net worth individuals and institutions. Prior to that she was China investment banking head at SBC Warburg, where she worked together with Ding.

Fu, the team's research director previously worked in Goldman's investment banking division advising Chinese companies and government entities.

Ginger distributes the assets in the greater China fund equally between two portfolios. One is macro with a China theme play, which can invest in commodities, fixed income and forex, and the other is equity long/short.

Ding argues Ginger's macro approach to investing in Greater China distinguishes it from other China-focused hedge funds. "Our approach to the long/short portfolio is to take a top-down macro view on the direction of events and then use a bottom up approach to pick the stocks most likely to benefit from these trends," he comments.

"We also felt that interpreting our macro views through an equity fund was not always the most efficient means, so we invest in a variety of instruments in our macro portfolio that allow us to take full advantage of the breadth and depth of the market. This differentiates us from other China-focused funds, which tend to take a very fundamental, bottom-up stock picking approach."

Ding says the fund is reasonably active in shorting and currently is exposed mostly to Hong Kong, China and Taiwan companies, although foreign companies with significant China exposure are also included in its mandate. He feels the Chinese economy will continue to be strong in 2005 (vis-à-vis a slow down in the US) with the raw material sector as a good performer.

Morgan Stanley and UBS are prime brokers to the Ginger fund and HSBC is the fund administrator.