HuaAn Asset Management Hong Kong launched its first fund this week – the Greater China Thematic Long/Short Fund – and has already set its sights on a long-only product and ETF fund.
“We have seen the increasing demand for alpha-based Greater China equity funds but the market is saturated with a lot of beta-related or benchmark driven products,” explains HuaAn chief investment officer Craig Chen. “So we decided to launch this long/short equity fund to generate positive return in different market conditions.”
The new Greater China hedge fund is built on a pure stock-picking strategy, primarily for Hong Kong listed companies. But it also invests into mainland A-shares and B-shares – courtesy of a QFII quota from prime brokers – and stocks of Chinese firms listed in the US and Singapore and Taiwanese stocks.
“China’s economy will experience a structural change in the next five years,” says Chen. “Some cyclical sectors, such as real-estate-related industries, will decline from the peak; and some show growth potential including the consumption, high-tech and service industries.”
HuaAn AMHK aims to leverage the research capability of its parent, HuaAn Funds, in Shanghai to identify outperformers and industry leaders, and will short-sell stocks which “destroy shareholder value, run fake books or are entering a declining stage”.
However, taking today’s volatile market conditions into account, Chen does not expect a sharp upturn in the fund’s performance in the near term. He says he is seeking to control fund beta in a range of 0.2 to 0.6. “We want to provide investors with steady absolute return with relatively low beta,” he explains.
The Cayman Islands fund was launched this Monday with a starting position of $10 million. It is targeted at global long-term professional investors such as pension funds, private banks, sovereign wealth funds, fund of funds, high-net-worth individuals and family offices.
HuaAn AMHK, established in December last year, is also planning a long-only fund and an ETF fund, although no further details were available. Its parent already manages two ETFs in China.
HuaAn AMHK’s deputy CEO George Ding and Josef Sheikh, vice-president of client service and marketing, both have experience in managing and marketing index products at Barclays Global Investors. Operations head Betty Lee also has relevant experience from State Street.
Ding joined the firm in 2009 and Sheikh joined three months ago. Lee’s hire was completed last month.
Sheikh notes that the company will continue to expand and will fill key positions in the coming months, including an economist, an investment strategist and business development professionals.