Asia continues to lag other regions for integrating ESG principles with investing; better data and stronger regulatory requirements will help institutional investors, market observers say.
They have worked together for several years, initially at GIC in Singapore, with Lee working as a trader and Lien on the research side. They then joined Kim EngÆs investment division in 2001 and the following year set up Pinnakell Asset Management as a boutique investment vehicle wholly owned by Kim Eng, investing Kim Eng funds via a managed account.
Returns for the portfolio for those three years were 36% gross and 27% net. Those figures have been audited, and that quantitative track record may help to set them apart from other start-ups as it assists institutions and funds of funds with a series of existing data points. During that period they have also fine-tuned their methodologies and risk management.
So why evolve into a hedge fund now? ôWe felt our performance was good,ö says Lee, ôand thought the time was right to bring in other money.ö
The strategy will be Asia-ex Japan long/short equity, long-biased with a 30-80% net exposure. Weighting initially will be one third Singapore, one third Hong Kong and the remainder in other Asian countries, but this may evolve. ôWeÆre strong in Southeast Asia,ö says Lien. ôWe donÆt think weÆre operating in a saturated long/short equity hedge fund market as skills for this region are not so prevalent. In any case there are many IPOs taking place here, and lots of scope for stock-picking in small and mid-cap, and opportunistic approaches to larger cap.ö
Target returns are 20% per year. Volatility will also be 20%, with daily value at risk of 2%, estimated on a 95% certainty basis. Fees will be 1.5% and 20% with a high water mark. The fund will not be leveraged.
The fund has been seeded to the tune of $10 million by Yuanta Asset Management. Assets under management at inception will be around $15 million. The target is $100 million by the end of the first year of trading. There will be no lock-ups but a redemption fee based on a sliding scale, from 5% for a withdrawal after less than six months down to 0.3% for withdrawals after two years. The principals estimate they will be turning over the portfolio four times per year and at any given time will have about 40 positions on their books.
Pinnakell will also continue to handle a managed account of Kim Eng. Before setting up the hedge fund, Pinnakell had no prime broker and so Kim Eng acted as custodian and helped to access stocks for shorting purposes. As well as their own research via an extensive client visit agenda by Lien.
The fund management industry in Singapore is regulated by the Monetary Authority of Singapore. However, Pinnakell Asset Management is exempt from holding a Capital Markets license and will be restricted to marketing the Pinnakell Asia Absolute Fund to qualified institutions and high net worth individuals.
The fundÆs Singapore lawyers are Rajah and Tann. Its Cayman lawyers are Walkers. The prime broker is Goldman Sachs and fund administrators have not yet been appointed. The fund auditors will be Ernst and Young.
The appetite of institutional investors for green, social, and sustainable bonds that bring clear environmental and socio-economic benefits shows no sign of waning.
The German insurer has plans for the property sector in Australia and China too.
Global investors are advised to look selectively at Japanese equities as the country recovers from lockdown and continues to improve corporate governance.
Weekly investor roundup: Sun Life weighs second ESG fund in HK; Korea's NPS reduces domestic equity allocation
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