Ronnie Wu, Partner and CIO, Penjing Asset Management
Can you tell us a bit about Penjing Asset Management?
Founded in March 2005, Penjing is an independent asset management firm specialised in Asian hedge fund investments. I previously worked for JP Morgan Chase, UBS and Vision FoF and I am now the CIO of Penjing. I am backed by a team of 9 investment professionals which the key investment professional have average 11 years of FoFs management experience. There are another 13 staff in the operations area performing legal and compliance, operations due diligence (ODD), investor relations, general administration and accounting functions. We manage around US$600 million of clients’ assets. A majority of our investors are institutions based outside of Asia.
Describe your investment strategy and why it differs from what other fund managers are doing.
We are absolute return oriented which means we aim at preserving capital while maximising “risk-adjusted” returns across the mandates and funds we manage. Our investment process is primarily bottom-up driven, i.e. doing intensive research on individual funds and managers to best understand their investment skills, edges and styles to determine if they are fit to be placed on our approved list of “investable universe”. Aside from ensuring the selection of the best-of-breed managers, we consciously add-value through allocation decisions in terms of strategy, asset classes, sectors, markets as well as position sizing. We are not afraid of investing in a hedge fund at its early stage if the manager can demonstrate its investment and business capability. Disciplined rotation to new talents enables Penjing to participate in managers’ start-up and growth phase of their business life cycles. We pride ourselves on the ODD capabilities through our hand-holding approach that benefited many new managers in their early stages.
What investment themes in Asia do you see as the most attractive at the moment?
The Penjing Asia Fund (“PAF”), our flagship Asian FoF program, invests across a diversified portfolio of hedge fund strategies, asset classes and geographies. For PAF, we intend to maintain abalance between market independent and equity long short strategies. At the same time, there are other funds with specific guidelines to cater for the diverse interests of our investors who may be seeking manager alpha and/or market beta in various proportion based on a targeted risk budget. At present, we favor managers excelling in Asian macro, volatility trading and stock pickers among others. The former two should benefit from the opportunities arisen from the sharp spikes in
volatility level and resultant dislocation across asset classes. After the broad equity market sell-off, the fundamental stock pickers would be able to go long on winners (good companies) at decent value and go short on losers ( companies with poor management and fundamentals) for alpha generation.
How has your approach to risk management changed in recent times?
Risk management is an integral part of our investment process. We are vigilant against any risk that would result in capital loss. After the global financial crisis of 2008, we have tightened our requirement on transparency and liquidity of underlying managers. Around 70% of our managers can be exited on a monthly basis and we do not normally invest in funds with hard lock-ups over 1 year. Our quantitative investment team responsible for tracking and monitoring manager and portfolio risk control parameters provides risk analysis and alerts for the portfolio team to consider appropriate actions.
Do you see changes in regulation as a threat or an opportunity?
We welcome regulation to enhance professional integrity, improvement in portfolio transparency and leveling of playing field etc. Nonetheless, regulating to the extent of adding complexity to operate an asset management business and hinder market clearing (through banning of short-selling) would not be a positive development for the financial industry as a whole not to mention hedge funds particularly.
Fundraising in Asia: as Asian investors increase their hedge fund allocations, do you think Asian managers will start to benefit more or will big global fund managers get most of the assets?
So far we have received more inquiries from investors based outside of Asia when compared to Asian based investors. Having said that, we are aware of increased interests in hedge fund allocations from sovereign wealth funds, family offices and insurance funds in the region. The key concern for these Asian super-investors is the current shortage of capacity to satisfy their appetite. From recent examples, managers with proven skill-sets can easily raise capital in Asia.
What would you have done if you hadn’t been running a fund management firm?
We have not given this topic a lot of thought since we all have been in the industry for a while. I think it is likely that we will run our own money and the only difference then is we only answer to ourselves.