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“Hidden jewels in green energy small caps” says E Fund’s Lin

November 18, 2010
- 6:29 pm

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Having already launched the Bright China Opportunity Fund last year, E Fund Management (HK) Co. now has its sights set firmly on raising up to USD500million for a pair of new funds du

Having already launched the Bright China Opportunity Fund last year, E Fund Management (HK) Co. now has its sights set firmly on raising up to USD500million for a pair of new funds due to launch early next year. With Greater China hedge funds generating double-digit returns over the last two months, the timing could be inspired as the firm, China’s second-largest mutual fund house, looks to build on its China expertise and compete with the likes of Fidelity. Speaking to Hedgeweek on the performance of its Bright China Opportunity Fund, which uses an equity l/s strategy, Managing Director Nathan Lin confirmed that the fund was in the low teens ytd. “The last two months the market’s gone crazy,” said Lin. “We were up +4 per cent end-August whilst the Hang Sang Index was in negative territory. We’ve underperformed the index the past two months and were perhaps a little slow reacting to this liquidity-driven rally.”

The USD29million fund uses a fundamental approach to stock picking, with Lin believing that it is smart stock selection combined with a strong on-the-ground team of analysts based in E Fund’s Guangzhou office that helps generate alpha. “Each week they discuss and evaluate companies and investment opportunities across the country,” said Lin, who visits the office weekly. The fund invests mostly in Hong Kong, Taiwan and US-listed Chinese companies, which it selects from a fund universe of roughly 500 companies. Key sectors include consumer discretionary and healthcare; the two biggest stock holdings being a pharmaceutical company and a meat processing company. As China slowly evolves into a more import-focused, domestic-driven economy, Lin confirmed that he would be keeping a close eye on the consumer sector, in addition to the green energy sector. “There could be some hidden jewels in small cap companies but these tend to be illiquid so we need to be careful.” Lin added that with respect to the two new funds (one an emerging market equity l/s fund, the other a Greater China long-only fund), USD50million in seed capital had been committed by the parent company just two days ago. Both are expected to launch in Q2 2011.

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