Sun China hedge fund identifies select opportunities

A new equity long/short hedge fund, Sun China, finds value in beaten-down volatile Chinese stocks.
The Sun China Fund, run by Kevin Yip and Tammy Ching, opened in mid-2007 and returned 43% net in that year.

The fund is at $100 million and would like to grow by a further 50% this year. Its theme is Greater China, including H-shares in Hong Kong and domestic A-shares in the mainland.

The CEO of the fund is Yip, who spent 10 years at Asian investment group GEMS alongside tai pan and former French Foreign Legionnaire, Simon Murray. Sun China's CIO is Ching, who was a managing director at HSBC overlooking the Greater China region. In charge of research is Nigel Chan, who covered Greater China and Hong Kong equities at Barings and then through that firmÆs subsequent reincarnations at ING and Macquarie.

ôI expect a little more downside as global markets are still grappling with lack of transparency and valuation of assets in the financial system,ö says Yip. ôThe problem is not confined to one subprime asset class any longer. That said, I think there are still opportunities.ö

For example, he says that some Chinese property stocks are down 50%, but their businesses are still relatively strong, with 30% earnings growth and single digit price-earnings ratios.

The Sun China Fund was down 11% in January. Last year, the Fund was up 43.1% since its launch in April 2007. The fund targets returns of 25% on low-teens volatility. Fees are 1.5% and 20%.

Gross exposure is typically around 150% (today standing at 100%) and net exposure is generally at 60%-70%. The fund can have maximum leverage of up to 200%.

Service providers for the fund include Goldman Sachs as prime broker, custodian and fund administrator, and Deacons as its law firm.
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