Trading has begun for San Francisco-based Tricera Capital's new Asian equities long/short fund. Tricera's founder, Raymond Lin, was previously with SIT Investments, a $6 billion Minneapolis-based investment house. After spending eight years focusing on Asian stocks with SIT, Lin says that he developed his own ideas about trading Asian stocks and in November last year launched Tricera's Asian equity long/short fund.
"The fund currently has a few million dollars under management, consisting of my personal capital as well as the seed capital of a few high net worth individuals," says Lin.
His fund focuses on value-added sectors (e.g., tech, telecoms and consumer goods) in the 'developed' markets in the region, which include Hong Kong, Japan, Korea, Singapore, and Taiwan, as well as China.
Lin says that the fund adopts a long-biased strategy. "The long-term direction of the Asian markets is up and market-neutral funds will not be able to capitalize on this. Short positions are important for risk protection. Asian markets tend to be volatile in nature, experiencing periods of euphoria and periods of precipitous decline, in which long-only managers will loose their gains."
Shorting Asian stocks can also be a costly exercise, so a long-biased fund can ensure a high level of return, he argues, adding the fund is targeting an annual return of 15%-20%.
Why locate in the San Francisco when trading purely Asian stocks? According to Lin his US location works as an advantage for his trading strategy.
"I focus on trading the value-added sectors in the Asia economies, such as tech, telecoms and consumer goods. For many of these, the end product user is in the US, so being based here I can see trends in demand at their early stages. Moreover, many of these Asian companies get most of their business from US firms outsourcing," says Lin. Being based in Silicon Valley allows him to pop into a show room and have a look at the tech products on display and to assess the competitive position of the stocks he is investing in.
Traditionally, hedge funds with Asian strategies have chosen to locate outside the region in order to be close to the sources of capital, which have predominantly been from US and European-based institutional investors. Asian hedge funds in the US have an average of $200 million under management compared to the $80 million average managed by their Hong Kong based counterparts, according to Eurekahedge Advisors.
"It certainly doesn't hurt to be near the investors," admits Lin. He says his US location is especially useful because of the relationships and contacts he has built up over the years.
"There is definitely a lot of interest in Asia among investors over here. Things have picked up since a year ago," says Lin.
In order to monitor the Asian markets, Lin works irregular hours. He gets into the office at noon, and stays there till the end of the morning trading session in Asia, after which he goes home and monitors the market from there.
For now, the Tricera team consists of Lin, one analyst and a consultant based in Hong Kong. Lin says that he takes a trip down to Asia about once a quarter.
Prior to his eight years with SIT Investments, Lin worked in the foreign exchange group at JPMorgan in New York.