Monthly Archives: September 2011

Elmore Capital

Samuel Choi, CEO, Elmore Capital

 

Can you tell us a bit about Elmore Capital?
Elmore is an independent investment manager in Hong Kong founded in 2009. Our ambition is to be a regional player, creating a Hong Kong based platform for managers covering the regional and global markets. Chris Ni, senior portfolio manager, currently manages an Asian Multi-Strategy Alpha Fund – Elmore AMSA Fund Limited comprising three independently managed strategies, namely an Asian focused equity strategy (AES), an Asian focused currencystrategy, and a commodity strategy. Elmore is launching the AES as a standalone fund because of the excellent returns that it has produced up to 2011 July, (+12.7% YTD, 20.0% in 2010, and +38.5% since inception with a standard deviation of only 11.9%). Elmore has managed the AMSA Fund and thus the AES since August 2009. The underlying strategies and models for the AMSA Fund and the AES had originally been created and also managed by Chris within Shin Kong Life, an Asian life insurance company.

 

Describe your investment strategy and why it differs from what other fund managers are doing.
The fund management team adopts proprietary trading and risk management models to apply economic and behavioral-based quantitative filters and qualitative views to invest on a market neutral basis. The AMSA Fund seeks alpha from the three uncorrelated assets and strategies. In particular, the Asian Equity Strategy generates alpha by adopting bottom-up multi-factor quantitative stock selection processes, utilising quantitative filters and judgmental factor weightings, in conjunction with risk management processes aiming to limit downside volatility.

 

What investment themes in Asia do you see as the most attractive at the moment?
Despite the recent high volatility in various Asian markets, we continue to find the market neutral approach very successful in generating consistent returns. We succeed in generating alpha from our Asian Equity Strategy’s proprietary models, particularly Australia and Malaysia.

 

How has your approach to risk management changed in recent times?
Our risk management approach has stayed more or less the same. We adopt prudent risk approach and focus very much on downside risk protection, with maximum monthly drawdown of less than 3.4% and 2.9% while annualised standard deviation (rolling 12 months) of 7.2% and 11.9% respectively, for the AMSA Fund and the AES since inception. That is achieved by our market neutral approach, investing in highly liquid instruments, and diversification in assets, and across countries, sectors, products, or positions. We monitor limits, e.g. in CVaR, trade positions, or drawdown, on a daily basis.

 

Do you see changes in regulation as a threat or an opportunity?
As an emerging manager, we see the new regulations as additional cost burdens. The potential marginal benefit to Elmore and its investors seem to be outweighed by the potential cost at this stage.

 

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?
Although the market has recently seen a return of allocations to emerging managers driven by performance, we find branding is a major focus for many investors subsequent to the financial tsunami. Accordingly, in the near future, the increase in allocation by Asian investors will probably benefit most those managers (Asian or global) with “brands” as individuals or firms.

 

Why have you chosen to operate from Hong Kong?
Hong Kong provides the optimal balance of location, legal and financial infrastructure, access to investors, and growth opportunities in Asia for Elmore.

 

What would you have done if you hadn’t been a fund manager?
Not an option for Elmore at the moment.

(Sep 2011)

TT International is shutting its TT Asian Opportunities Fund as its size has fallen to just US$28m. The fund’s Hong Kong-based portfolio managers Marius Oberholzer and Nicholas Studholme-Wilson are leaving the firm.

 

LGT Capital Management has hired Marcel de Bruijckere (ex-Fortis, ABN AMRO) in Singapore as head of Asian distribution. The firm plans to make additional hires as part of its Asian expansion.

 

 

Manraj Sekhon (ex-head of international equities at Henderson Global Investors in London) will start his new gig as CEO of Fullerton Fund Management, a unit of Singapore’s sovereign wealth fund Temasek, on 1 October.

 

 

Over 250 Singapore hedgies and investors came together over drinks at the Tower Club for the sixth Singapore Hedge Funds Club networking evening on Thursday night.

 

According to HFR, US$2.6 billion of new capital flowed into Asia-focused hedge funds in the second quarter of 2011 taking total AUM in the region to US$90 billion.

 

Robert Bennett-Lovsey has left his business development role at Castlestone Management in
Singapore.

 

According to Eurekahedge, Asia ex-Japan hedge funds were -0.94% in August and -4.74% YTD while the HFRI Emerging Markets Asia ex-Japan Index for August was -6.22% which brings the YTD to -7.75%.

 

Carl Huttenlocher, who left JP Morgan’s Highbridge hedge fund earlier this year, has delayed the launch of his new firm Myriad Asset Management in Hong Kong reportedly due to an SEC review.

 

 

Quaternion Capital Management

Marvin Kelly, Founder and Portfolio Manager, Quaternion Capital Management

Can you tell us a bit about Quaternion Capital Management?
Quaternion is a fund I co-founded in January this year after leaving Credit Suisse’s proprietary
trading group. Its focus is developing market-neutral quantitative strategies, primarily for global equities and futures.

 

Describe your investment strategy and why it differs from what other fund managers are doing.
Our primary area of interest is statistical arbitrage, where we have an edge as a result of extensive research and trading experience across all major markets for the last 11 years. Instead of relying on a single model or approach, we employ a variety of methods to identify and develop a portfolio
of strategies based on diverse methods and signals to reduce risk. We also address trading at multiple time frames, from longer-term valuation and stock-selection to short-term execution.

 

What investment themes in Asia do you see as the most attractive at the moment?
One particular theme is “will Japan finally begin to recover?” This question has been asked many times in the last 20 years, and each time of course the answer has been “not yet”. If the Japanese economy can finally escape from deflation and the equity market does exhibit some strength and garner more interest from international investors, it will be beneficial to a variety of strategies there. Most quant strategies are beta-neutral and not dependent on market direction but they all benefit from increased flows and investor participation.

 

Has your approach to risk management changed in recent times?
With financial crises occurring every 9-12 months we have become more conscious of the effects of the macro environment on quantitative trading and the ways in which we can use risk measures and factor dynamics to characterize particular regimes. In the “good old days”, like 2009, it was enough to intelligently buy into underperformance across the board but it’s nowhere nearly that simple today.

 

Do you see changes in regulation as a threat or an opportunity?
New regulations passed to encourage fair and liquid markets expand the opportunity set; those passed as a result of fear, such as the recent short-selling bans, reduce it and have no real benefits to any market participants.

 

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?
Large fund managers have received the bulk of new inflows recently partly because of investor familiarity and the issues concerning due diligence in the post-Madoff environment. This trend will hopefully slow down a bit as investors seek higher returns from local funds which are less capacity-constrained but this will require a pickup in general risk appetite which is probably not on the horizon right now.

 

What is the biggest difference between your old gig as an investment bank prop trader and now running your own shop?

The benefits of being at a new firm include the ability to move quickly into new markets or strategies and better control of technology decisions which are important for quantitative trading. As a prop trader at CS a lot of the basic business functions were well handled by the firm’s support teams but the bank was less nimble in areas such as software development.

 

Why did you choose Hong Kong as a base?
I have lived and traded in New York, London, and Tokyo but Hong Kong beats all three in terms of a business-friendly environment and a convenient, modern infrastructure. It also has a good regulatory system and is attracting an expanding talent pool which bodes well for the future of fund management here. The “through-train” of capital from China has been slow to develop but is becoming more open which will also benefit HK.

 

What would you have done if you hadn’t been a fund manager?
I’d start a rock and roll band.

(Sep 2011)

Ash Patel has left his prime brokerage role at Barclays Capital in Singapore.

 

David Murphy has resigned from Deutsche’s prime brokerage in Hong Kong and is believed to be joining Citi’s Asian prime brokerage.

 

TSI International, a Canadian alternative investments manager focused on real estate-related investments, has appointed Stefan Nilsson (ex-JP Morgan, Bear Stearns) as a senior advisor to its
Asian operations.