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The company's first fund, the Marco Polo Pure China Fund, now has assets under management of $165 million. In 2007, that fund outperformed the China A-share market by 37% net, with no leverage.
The new long/short fund will launch with $25 million and has a target size for the first year of $50 million to $100 million, to be sourced from professional and institutional investors. Currency risks will be hedged. It will be benchmarked against the MSCI China index, and the hope is to outperform it at lower volatility, though there are no specific return or volatility targets at this stage. Fees are 2% and 20%.
Unlike some 'me too' Greater China funds that have been set up, this new hedge fund has a unique angle in the sense that it is the first time an exclusively A-share focused manager has moved into the wider Chinese markets abroad. Marco PoloÆs rationale is that its insight into A-share companies and understanding of those businesses will get the company ahead of the curve in developing ideas on Chinese-themed investment opportunities listed overseas, that analysts who are not looking in depth into A-share listed stocks might miss.
Chris Tang is CIO of the new fund, and will draw on the resources of nine people within Marco PoloÆs investment analyst group and investment committee, the latter including Aaron Boesky, CEO of Marco Polo Pure Asset Management, and the firmÆs president Alan Landau. Two more analysts will be hired for the team, a Greater China analyst and a sector specific analyst.
Unlike the pioneer fund, the new hedge fund will see Marco Polo short-selling for the first time. In practice, this is likely to entail shorting indices, although single stock shorting will be carried out if a specific opportunity arrives. Projected gross exposure of the fund is 50%-150% and maximum short exposure is 50%. Leverage may be used to a maximum of 200%.
With China stockmarkets down 16% in January, it was a defining moment for the hedge fund managers in that arena. While there are no reports yet of redemptions, there were drawdowns in China funds, with a demarcation between momentum players, who got the worst of the market fall, and the value specialists, who had made more of a pre-emptive move into cash and were not so badly affected by the fall.
Deutsche Bank is the prime broker for the new fund, Fortis is the fund administrator and PWC is the auditor.
The AU$85 billion ($61.6 billion) Australian super fund has some exposure to indebted property developer Evergrande. Meanwhile, China’s construction finance is part of its core strategy in real estate.
Investors are seeing the risks, but also the opportunities of the logistics sector. Warehousing their fears for the moment, they can see it's a good conduit to high-growth assets.
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SGX’s new framework for Spacs will likely provide investors with a much-needed channel for direct deals, but the verdict is still out on whether it will bring liquidity to the bourse.