The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
Mark White, London-based CEO, says three years of back-testing suggests both that there is now scope for a China-focused product investing in good-quality managers, and that hedge fund managers do add value by protecting investors from downside risk.
The fund is skewed toward equities as there are no China fixed-income strategies that KGR could find, but within equity there are diverse strategies, including arbitrage, that allow for some degree of diversification.
Two of the top-10 holdings include Dragon Billion and Galaxy, two Hong Kong-based Greater China funds.
White acknowledges that, 18 months into a massive A-share rally, many investors havenÆt seen the need to pay fund-of-fund fees or, for that matter, to bother with China hedge funds. ôBut now we are in a different phase,ö he says, noting that Chinese authorities are trying to prevent a stock bubble from getting out of control. This is likely to include measures to liberalise domestic investments. ôThis will create arbitrage and other opportunities for hedge funds over the next 12 to 18 months.ö
Moreover, KGRÆs own back tests suggest that while the A-share index has now provided a net 24% return with 20% volatility over the past three years (remembering the first half of which included some mighty market tumbles), KGRÆs initial portfolio of managers delivered 22% for less than 10% of the volatility.
The fund of funds will include Greater China strategies and at this point only a small fraction of the underlying assets are directly invested in A shares. But the Greater China hedge fund universe now accounts for nearly 100 funds. White says this is nearly the size of the Japanese market. In asset terms, Japan funds are bigger, but are in decline, whereas China strategies are raking in assets. White predicts the two will reach parity sometime next year.
Like its other funds, the KGR Capital China Absolute Return Fund is domiciled in the Cayman Islands, charges 2/20 fees and is administrated by Citco. It is denominated in US dollars but euro and sterling classes will be available, with a minimum investment of $100,000. Structurally the only difference is liquidity: the China product deals monthly but requires a 90-day notice before redemptions. KGR Capital manages a total of $350 million in Asia-focused funds of hedge funds, including a $150 million Asia-Pacific version.
Sunsuper and QSuper appoints CIO for combined entity; State Street appoints heads of HK and Taiwan; Nothern Trust rebuilds Apac team; Manulife IM names emerging markets fixed income CIO; RBC Wealth Management hires four into HK; Lombard Odier hires two senior equity managers; Allianz Global Investors appoints Asia hand as equity CIO; and more.
Investors from China and the US are expected to continue buying assets in each other’s markets despite the blacklist of Chinese firms with military and surveillance ties.
Stronger government actions are needed to meet the Paris Agreement goal of limiting global temperature rise to 1.5 degrees, investors such as Hesta and CDPQ signed in a statement.
AsianInvestor explains why we chose the winners of the second half of our 2021 fund manager winners, by major local markets.