UK hedge fund manager Met Capital Management says its planned systematic Asia long/short equity strategy will attract European investors thanks to a niche stock-picking approach.
The algorithmic trading-based strategy will trade small- to large-cap stocks – with a minimum $250 million market cap – in Australia, Hong Kong, Japan, Singapore and South Korea. It is broadly based on the post-earnings stock-momentum strategy used by the firm's Met Europa Fund.
Met Capital’s proprietary algorithm scans upcoming listed company results and result calendars daily, in addition to catalysts that would affect stock price movements. “We will verify that the event has happened, then execute any resulting trades,” says chief operating officer Adam Foster.
The volume of trades will vary, but is likely to be around 15 transactions a day, he tells AsianInvestor. The portfolio will be handled out of London, with Met co-founder Jonathan Gordon – a former proprietary trader for Banco Santander and Société Générale – serving as the primary fund manager.
Met Capital says its Asia fund will stand out among the region’s long/short equity strategies, which largely rely on fundamental analysis of stocks. “A lot of European investors are looking for exposure [in Asia]," says Foster. "We feel we’ve got a niche in the market.”
Met will start running in mid-April a managed account based on the Pacific fund strategy, on behalf of a European investor, says Foster. The firm is seeking a seed investor for the co-mingled Asia fund, which the firm aims to launch by mid-year with about $30 million in starting capital.
“We estimate the capacity to be about $1 billion,” says Foster. Fundraising will initially be focused on the UK and Europe, where the bulk of Met’s investors are based. Met Pacific targets a return of 15%-plus, with 2% management and 20% performance fees.
Met Europa, with $40 million in AUM, has returned 17.08% on an annualised basis since the strategy was launched in 2007. However, the algorithm appears to have been disconcerted by the European debt crisis, with returns of 1.17% in 2011 and -1.04% in 2010
Met Europa will differ slightly from Met Pacific in that the European fund employs additional strategies as “bolt-ons” in addition to its core algorithmic approach, including mean reversion and pairs trading, says Foster. The Asia fund, by comparison, will be “purely systematic”, he notes.
Global assets in the commodity trading adviser (CTA) hedge fund category reached a historic high of $219.6 billion in February, according to data provider Eurekahedge. The category, which includes algorithmic trading – or so-called ‘black-box’ – strategies, tend to attract greater investor attention during times of extended volatility.
Investors turn to CTAs to “diversify their portfolios and tactically position their holdings for higher bouts of volatility”, says a recent Eurekahedge report.
Man Group and Winton Capital, both based in London, and Renaissance Technologies of the US are among the biggest systematic hedge fund managers globally.