Sun, 13/11/2011 - 19:03
Chin Pu Ma and Chien Wang (pictured), partners and chief investment officer and chief operating officer respectively of Amsterdam-based Asian Century Capital, are looking to attract investors with an eight-year track record of successful investment in Asia on behalf of Dutch banks and an investment style that combines macro themes, a disciplined value-orientated approach, in-house research and the flexibility to go either long or short.
GFM: What is the history and background of your company, principals and fund?
CPA/CW: Asian Century Capital launched the Asian Century Fund on 1 October. The fund’s investment style is variable long/short equity with a thematic approach, investing globally in all market caps. Asian Century currently manages EUR5m in assets.
The firm’s principals and partners, chief investment officer Chin Pu Ma and chief operating officer Chien Wang, are econometricians with proven track records at Dutch banks and are also the fund’s managers. Chin Pu Ma was an arbitrage and derivatives trader at institutions including Fortis and Rabobank, while Chien Wang was a portfolio manager and analyst and banks including Robeco, Rabobank and Dresdner VPV.
The fund follows the same investment strategy pursued by Chin Pu Ma since 2001 with Fortis and Rabobank. Within a clear secular macro vision – the ascent of Asia as the dominant global economic region – the fund managers identify attractively-valued themes based on the macro view. They are disciplined value-focused investors.
The Asian Century Fund is an absolute return strategy with a target return of 15 to 30 per cent per annum net of fees, a target backed by the historical results of the strategy over an eight-year period. Both managers have put in a significant part of their wealth in the fund.
GFM: What is the structure of the fund?
CPA/CW: The fund is domiciled in the Netherlands as an onshore fund for joint account. It is tax transparent and not supervised by the AFM.
GFM: Who are your main service providers?
CPA/CW: The administrator is ANT Financial Services and the depositary is Stichting Depositary Asian Century Fund, both in Amsterdam, while the prime broker is ABN Amro Clearing Bank. The fund’s auditor is BDO Audit & Assurance, our legal adviser is Van de Kamp & Co, and the tax adviser is BDO Accountants & Belastingadviseurs.
GFM: What is your distribution strategy and targeted client base?
CPA/CW: We have a long-term marketing strategy. During the first years we will focus on high net worth individuals. Starting in the third year, we will start marketing to family offices, some of whom we already have been in close touch with. From the fifth year, we will also target pension funds. However, our fund is self-sufficient from the start, which allows us to focus us on performance, which is and will remain our raison d’être.
GFM: Please describe your investment process.
CPA/CW: Our investment style is to express macro themes through equities. We invest globally, based on investment themes we identify from the global macro view. For each theme, we will identify the best way to achieve capital growth for the fund, taking into consideration the risks and return involved.
For security analysis, we follow a disciplined value-orientated approach based on the margin of safety principle, using in-house research and valuation models. The combination of macro themes, disciplined approach, in-house research and flexibility to go either long or short defines our investment style.
We expect to run a portfolio with positions in up to 10 such themes at any particular time and to have up to 80 investment positions divided between the themes.
GFM: How do you generate ideas for the fund?
CPA/CW: Our ideas come from our own research, based on our secular macro view and the derived investment themes, and are prompted by changes in outlook at macro, country and sector level, shifts and market developments in equity, credit, interest rate and foreign exchange markets, and specific changes at individual companies.
GFM: What is your approach to managing risk?
CPA/CW: We use the value at risk method to manage market risk, and manage portfolio risk by running scenarios to stress-test the portfolio on possible profits and losses. We manage liquidity risk using the rule of thumb that at least 50 per cent of the portfolio should be capable of being closed out within two weeks at reasonable market prices. This is assessed via the market capitalisation and traded volume for the positions in the portfolio.
We also apply drawdown risk management. If the net asset value of the fund falls at least 10 per cent from the preceding month, we will re-examine every position and adjust them if necessary. If the NAV falls by 15 per cent from the previous calendar year-end, gross exposure will be reduced by at least 30 per cent within one month provided there is sufficient liquidity in the market.
GFM: Are you looking at any particularly attractive opportunities right now?
CPA/CW: We are currently focused on special situation stocks, blue-chip equities in Asia trading at a huge discount to NAV. We are also looking at stocks with a dividend above 5 per cent with low valuations, growth sectors in Asia uncorrelated to the global economy, and as short candidates highly leveraged companies in Europe and the US.
GFM: What developments do you expect to see in the coming year?
CPA/CW: Volatile markets will cause divergence between hedge fund managers’ performances.
GFM: How will these developments affect the performance of your fund?
CPA/CW: Our view is that the markets will remain very volatile over the next couple of years, and our long experience in navigating very volatile Asian markets will definitely help. In addition, the flexibility to be either long or short is a big advantage over long-only funds. As a small hedge fund, we are very nimble and able to shift gears rapidly according to market circumstances.
GFM: What do investors currently expect from managers, and how do you deal with those expectations?
CPA/CW: Trust is the key to relationship between investors and fund managers. Our investors trust us, because we communicate openly and clearly about all key aspects, including fund set-up, investment strategy, risk management and capital commitment from the partners in the fund. In addition, it is very important that investors have a clear understanding of the strategy and the risks involved in achieving the target return.
GFM: What differentiates you from other managers in your sector?
CPA/CW: We believe our unique investment approach will enable us to harvest alpha from multiple sources, reduce downside risk and generate superior risk-adjusted returns. We have a proven track record of more than eight years at major banks using the Asian Century Fund investment approach prior to the fund’s launch. Finally, with a significant part of our wealth invested in the fund, we have ‘skin in the game’ – our interests are strongly aligned with those of investors.
GFM: How do you view the environment for fundraising over the coming 12 months?
CPA/CW: Performance will be key. We expect volatile and tough markets over the coming period that will separate the men from the boys. We expect strong divergence between hedge fund performance, circumstances that will more than ever favour the winners.
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