the specialist fund will cover most asian equity markets especially, going long china and short japan
Baring Asset Management (BAM) has strengthened its alternative offering with the launch of a specialist fund of mostly long/short hedge funds focusing purely on the Asian market.
The aim of Baring Asia Hedge Select (BAHS) will be to tap into the Asian growth story (led by China) on the long side, and systemic economic problems (led by Japan) on the short.
With a intended returns of 7% over the risk-free rate and the same for volatility, manager Tom Maier will aggressively allocate between regions and sectors to capture upside predicted by the Barings global strategy team, while keeping capital protected through managing exposure to shorts and fixed income strategies.
In a break with fund of hedge fund tradition, there will be no performance fee, just a 1.5% annual charge plus an administration fee of 0.15% for the dollar share class, 0.17% for euro and sterling. The minimum investment will be $100,000.
BAM will provide asset allocation and portfolio risk while investment advisers Fauchier Partners will analyse managers and provide ongoing due diligence. Because the hedge fund specialist already controls $800m in hedge funds, this arrangement also gives BAM access to nominally closed vehicles, according to Maier.
'We, as a house, do not have the expertise Fauchier has in selecting or monitoring hedge fund managers,' admitted Maier.
'We have a monthly strategy meeting and we come up with an overall strategy. Our offices in Hong Kong and Tokyo make investment decisions for the region as well as individual countries so we have a clear view of what the investment environment looks like.
'While we would not expect to add value through asset allocation decisions per se, we can risk budget the strategy. For example, if we think that markets are going to be strong in Asia, we can emphasise those managers which are likely to take bigger risks in their strategy.'
As it turns out, BAM's market view is exactly that ' a bullish one on Asia.
'China is the driving force for the Asian region, if not the world,' said Maier. 'China is still opening up and becoming more entrepreneurial. That's a new circumstance and that change in circumstance creates investment opportunities, some of which will be on the long side some of which will be on the short side.
'For example, Japan, which was a highly-competitive manufacturing base, has been coming under pressure for the last 10 years and there are companies there that are going to have to merge or go to the wall.'
By happy coincidence, Japan also has a modern, efficient market, an advisable precondition for shorting individual stocks. The Japanese funds in the portfolio generally have a much larger short bias.
'In our proposed portfolio, our gross exposure to Japan is over 40%, but in fact the net exposure is only 4%,' said Maier.
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