Baring Asset Management have launch ed a new long/short hedge fund focusing on China that aims to deliver returns of between 15 – 25% a year .
The fund will short index derivatives to hedge when the fund managers believe markets are likely to fall. The fund’s long strategy uses 30 to 40 stocks selected on a bottom-up basis.
Baring says the new fund builds on a 20 year track record of stock picking in China and the record of the Baring Hong Kong China Fund, which has delivered annualised returns of 20.04% over the last five years.
The hedge fund will invest in the Greater China region, encompassing China itself as well as companies with substantial business exposure to China. The fund has a minimum investment of 125,000 or US $150,000.
Managed by BAM s Investment team in Hong Kong, headed by Khiem Do, the new fund builds on the excellent performance record established by the Baring Hong Kong China Fund, currently run by Lilian Co. This fund has delivered annualised returns of 20.04% over the last five years and 17% p.a. since inception 21 years ago.
The new Chinese hedge fund s long strategy uses a portfolio of approximately 30 to 40 stocks selected on a bottom-up basis with absolute return being the only objective. These stocks can be a combination of A, B, H, red-chips and other Asia Pacific or global stocks with an exposure to the long-term China growth story.
The short strategy is to short stocks or themes that are overvalued on fundamental valuation criteria. The fund will short index derivatives to hedge and/or when the fund managers believe markets are likely to fall.
We have a track record going back over 20 years of picking the right stocks in Greater China and avoiding the losers,” says Khiem Do, Baring Asset Management s Head of Asian Equities . ” This fund gives us the ability to generate additional alpha and protect capital by shorting stocks and indices when we think the time is right. To manage risk we will be monitoring the positions daily and adopting prudent risk controls and stop-loss triggers. Internal exposure limits will ensure enough conviction and diversification. We plan to close the fund to new investors when it reaches $200m.
Ian Pascal, Marketing Director at Baring Asset Management adds that the fund leverages BAM’s Asian expertise , and offers investors an alternative way to invest in the Chinese economy . ” The fund aims to capture substantial upside in a rising equity market and preserve capital in a falling market,” he says.
China is one of the most attractive investment opportunities in the world. Successful investment there requires in-depth knowledge and a professional presence in the region. This fund will appeal to investors who want to invest in the Greater China area but who may have concerns about the Chinese economy overheating in the short-term and wish to reduce their downside risk, given the high volatility in the Chinese market
This is BAM s first single strategy hedge fund, building on its four year track record running funds of hedge funds. The Baring Asia Hedge Select Fund was launched on 1 May last year and has generated a return of 23.4% against a cash return of 0.9% since inception