Sparx launches Greater China fund of funds

Tokyo-headquartered Sparx aims to raise $200 million for a new Greater China offering.
Alternative fund manager Sparx has launched a Greater China fund of funds. It has been seeded with $25 million by a pension fund client, but Sparx sees capacity at $200-$250 million. The fund will invest in a diverse array of hedge funds operating primarily in China, Hong Kong, Singapore and Taiwan.

The fundÆs target return levels are 15%-20% per annum, over a two- to three-year horizon, with an annual volatility of 10%. Sparx will charge a 1.5% base fee and a 10% performance fee. A high-water mark applies and there is an initial lock-up of one year.

The portfolio will reflect a relatively concentrated level of 5%-20% of net asset value per manager. The fund expects to invest in up to 15 names with 5-10 managers as core holdings at first. Strategy-wise, Sparx is targeting arbitrage, corporate restructuring, event-driven, increased volatility, volatility trading and classic equity long-short.

Market commentators might ask whether Sparx is joining the party too late with its offering. The China market is already in full flight and valuations are sky high.

ôThis fund was actually created based on a specific request from one of our clients. The client wanted a product that could capture various long-term investment opportunities in China,ö says Masaki Taniguchi, head of Sparx Group's Hong Kong office and co-head of Sparx Fund of Funds. ôWe also believe that China is a long-term play. Given the size and diversity of opportunities in China, as well as the expansion of China-focused hedge fund universe over the past two years, we proposed a fund of funds approach.ö

Sparx has pushed its boundaries out beyond the Mainland, mindful that some securities benefiting from China's growth may not necessarily be listed on the local markets, or on occasions when Shenzhen and Shanghai markets look expensive. ôCurrently, there is more exposure in Hong Kong than in China because we see further upside to Hong Kong-listed stocks from the QDII changes,ö says Taniguchi.

Tokyo-based Sparx, which acquired Hong Kong hedge fund PMA in 2007, now has more than $14 billion in assets under management, with offices in New York, London, Hong Kong, Seoul, Dubai, Sydney and Bermuda. Its fund of hedge fund operation already has global and Asia-dedicated strategies dating back to 1997 and 2002 respectively.
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