Baring Asset Management (BAM) is preparing to launch The Baring China Absolute Return Fund plc in June 2004, subject to regulatory approval.
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.
Managed by BAM's Investment team in Hong Kong, headed by Khiem Do, the new fund builds on the strong 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 long/short 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 EUR 125,000 or USD 150,000.
The fund seeks to:
* Provide sophisticated investors with returns of between 15 - 25% a year
* Give investors access to growth in one of the world's most dynamic economies (fund manager based in Hong Kong)
* Provide portfolio diversification in an absolute return focused fund
The new fund builds on a 20-year track record of stock picking in China. The 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.
Khiem Do, Baring Asset Management's Head of Asian Equities said: "We have a track record going back over 20 years of picking the right stocks in Greater China and avoiding the losers. 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."
Khiem Do added: "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 USD 200m."
Ian Pascal, Marketing Director at Baring Asset Management added: "This fund leverages our considerable expertise in Asia, offering investors an alternative way to invest in the dynamic Chinese economy and generate positive returns. The fund aims to capture substantial upside in a rising equity market and preserve capital in a falling market."
Pascal added: "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."