Hong Kong-based Pacific World Asset Management will soon launch an Asian fund of hedge fund product. The firm, founded by Chris Choy, has been managing fund of hedge fund portfolios since 1998 and has assets over $800 million, making it one of Asia's oldest and largest home-grown fund of hedge funds managers. Despite its Asian location, it has traditionally not invested in Asian hedge funds, focusing instead on low volatility global arbitrage portfolios.
The new Asian fund will be managed by Xavier Fanjaud who joined the firm a year ago from SHK Asset Management in Hong Kong. The fund is expected to launch with $10 million and will invest initially in at least 15 hedge fund managers.
The fund will aim for low volatility and a performance in the range of 8%-12% per annum.
Fanjaud says that the fund's focus on risk management and low volatility will distinguish it from other Asian fund of funds on the market.
"Most Asian fund of funds have a large part of their portfolio invested in equity long/short funds, and this tends to make their portfolios fairly volatile," says Fanjaud. "We will avoid investing in equity long/short managers, as this would require us to take a macro view on the economy, and I don't think this is what we are best equipped to do."
Fanjaud says his portfolio will be split between arbitrage focused strategies, which he describes broadly as those strategies that profit from volatile market conditions and fundamental strategies, such as distressed, event driven and merger arb funds, which tend to do better in more directional markets.
By balancing between arbitrage and fundamental strategies Fanjaud expects to control volatility in his portfolio.
The new fund will also distinguish itself by having a significant Greater China bias. Fanjaud says that 10% - 20% of the portfolio will be invested in absolute return, China-focused funds, which invest in the local Chinese market, including those that invest in closed-end fund structures.
The new Asian fund will have a limited capacity and Fanjaud says he will start to soft-close the product when assets hit $200 million. Unlike the firm's global arbitrage funds, which have seen significant interest from Taiwanese high net-worth investors, the firm expects most interest in the Asian fund to come from European and US investors, keen on low volatility Asian exposure.