Monthly Archives: July 2013

China Asset Management

Tian Gan, Portfolio Manager, China Asset Management

Tian Gan is Managing Director andPortfolio Manager at China Asset Management in Hong Kong. Mr. Gan started his career as an A-share sector analyst at Galaxy Securities in 1999, and then joined Guotai JunAn securities in 2003 where he was in charge of A-share equity strategy. In 2005, Mr. Gan joined Guotai JunAn Assets (Asia) Ltd. as a portfolio manager, and was fully responsible for two open-ended China funds in Japan. Mr. Gan joined ChinaAMC in 2008 as a portfolio manager to manage an H-share sub-portfolio under ChinaAMC’s QDII Fund, and became the portfolio manager of Cayman ChinaAMC China Growth Fund since the fund’s inception. Mr. Gan holds two Master’s degrees from the University of Reading and the University of Leicester in the UK, and a Bachelor’s degree from Sichuan University in China.

 

Can you tell us about your background and who the members of your fund management team are?
Founded in 1998, China Asset Management Co., Ltd. is one of the first asset management firms to setup in China, which was during the inception of the fund management industry in the country. With over US$50bn in AUM as of May 2013, ChinaAMC is a leading provider of China related investment services to institutional and individual clients globally. We are consistently ranked as the top player in China’s mutual fund market in terms of market share by a number of data providers. China Asset Management (Hong Kong) Limited is a wholly-owned subsidiary of ChinaAMC founded in September 2008 to strategically develop offshore business and investment capabilities. It is set up as a multi capacity platform that allows different investment teams to manage their own funds with an aim to create alpha and protect capital over the market cycles. The Hong Kong office is supported by ChinaAMC’s firm-wide infrastructure yet maintaining decision-making autonomy. The HK investment team currently manages over $3.5bn in equity and fixed-income investments, led by our CIO Michael Wen, myself as the hedge fund portfolio manager and our Investment Committee Chairman and portfolio manager Frank Li. Since August 2009, China Asset Management in Hong Kong offers a range of China related investment solutions to our clients including an A-share fund, China CSI 300 ETF, long only equity and bond products, and hedge fund strategies. We have over 40 staff in our HK office including a fully institutionalised back office, legal and compliance, and sales and marketing team, managed by our CEO Iris Chen.

 

For your long-biased, China equity-focused absolute return strategy you use bottom-up,  fundamental stock picking with a macro and sector overlay. Can you tell us more about your investment strategy and the investment process?
The China Growth Fund seeks to deliver attractive risk-adjusted investment returns over the long-term through rigorous fundamental analysis with macro and sector overlay to exploit the inefficiencies in the China market. I actively manage the fund’s exposures based on in-house macro insight developed through continual communication with industry associations, regulatory bodies and policy makers. The ChinaAMC investment team truly carries out our firm philosophy of “Research creates value”, as our extensive “on-the-ground” investment team is divided into three groups – sector research, strategy analysis and portfolio management team, enabling the investment professionals to devote their time specifically in each of their areas of expertise. This enables the team to make intensive on-site due diligence and analyse macro and market information to establish proprietary forecasts. This allows the portfolio managers, including me, to  advantageously construct the portfolio with high conviction ideas while adhering to risk management guidelines. The fund is actively managed and I will move around the fund’s exposures according to current market dynamics and macro situations. For instance, the fund’s net exposure was cut to negative territories in March 2013 when we expected that the effect of fiscal constraints will start taking effect in the second quarter which may drag the country’s GDP growth and equity markets. Our goal is to produce alpha and deliver a risk adjusted return for our investors.

 

Tell us about your approach to the short book of your portfolio. Do you use it just for hedging or also as an additional source of alpha?
I see shorting as a source of alpha and majority of our short book is in single stock shorts. The companies that we short are selected through deep fundamental analysis, which in most cases require more work versus our long positions. I also short the index occasionally when there are sudden market movements as an overlay to protect investors’ capital.

 

In what industry sectors do you currently see interesting opportunities?

Our research team believes there are lots of interesting opportunities in the new economy sectors such as internet related businesses (ecommerce, mobile gaming, etc), selected pharmaceutical companies, environmental related businesses, to name a few.

 

What sets you apart from the many other local fund managers that have launched China equity long/short funds in recent years?
Firstly, the China Growth Fund will have a four-year track record by August this year as it was launched in August 2009 with an annualised performance of 18.16% since inception. Secondly, the ChinaAMC investment team has unparalleled access to local knowledge and insights through our over 200 strong team of investment professionals that are solely dedicated to research and investments into China. Our analysts have developed extensive relationships with corporate leaders in each major sector and are able to facilitate extensive grassroots research to identify mispriced opportunities in both the long and short side. Thirdly, with our headquarters being based in Beijing, it allows our strategy/macro analysis team to maintain frequent dialogues with policy makers, regulatory bodies and industry associations to build in-house macro insights that we believe are indispensable to investing in China. Fourthly, the firm cultivates a strong cohesive culture where our Hong Kong and Beijing teams are fully integrated. In addition, our senior investment and business professionals have over ten years of solid financial industry experience, combining both China and global knowledge in building a top-tier institutionalised asset management house. Lastly, we have allocated significant resources to building our firm-wide trading and risk management infrastructure to ensure proper risk controls are being administered on both company and portfolio level.

 

Your Hong Kong-based fund team is part of China’s largest mutual fund management company. How does this benefit you compared to if you were an independent fund team?

As mentioned earlier, we believe one of our competitive advantages is the size of our investment team. As you know, intensive on-the-ground research requires a lot of time and effort to speak with company management, cross-check with suppliers, distributors and competitors. Moreover, we don’t just invest into large-cap names as we believe a good number of small- to mid-cap companies do have proven business models that are worthy to invest in. In addition, continuous monitoring of all companies is required to make sure the firms we invest in are in good shape. More so, understanding macro activities and market dynamics are essential for one to succeed when investing into the China market. It is rather difficult to assess the market and to fully understand what is happening locally without being in China. As the Chinese equity and bond markets grow, we believe new regulations will be introduced consistently to monitor as the markets continue to develop. With our team of strategists and macro analysts, ChinaAMC has the ability to decipher through all the noise to identify key market trends and opportunities to make diligent investment decisions in benefitting our investors.

 

Some high-profile global fund managers have suffered serious losses on Chinese equities over the past few years. Do you think this is because they have lacked local knowledge and that they naively have approached China in the same way they research and invest in Western markets?

I personally believe entry into China is no different to entry into any other emerging markets as it takes a long time to fully understand the culture and the ways business are being done in each country. Each firm’s business strategy is different so I don’t think it’s appropriate for me to comment on this.

 

The Chinese stock markets are rather inefficient as the capital markets are still at a developing stage and highly regulated. What is your approach to risk management in such an environment?
The firm has allocated significant resources to building our firm-wide trading and risk management infrastructure to ensure proper risk controls are applied on both company and portfolio level. We believe the best risk management is through our deep bench of research analysts in providing us with invaluable company and macro research.

 

There is a lot of talk about a slowing Chinese economy. How are you positioned to deal with this?

We are well positioned to weather through the current headwinds. I invest into companies that are carefully analysed with desirable fundamentals, business models with growth potential run by capable management teams, complemented by an actively managed portfolio where I will move the gross and net exposures based on macro issues and market sentiments. That is why a good number of our longs are in sectors such as internet related companies as I believe consumers will continue to enjoy playing online or mobile games which is far more affordable versus consuming luxury goods in the near term.

(Jul 2013)

HFC Advisory Group is pleased to announce that our long-standing partner Ogier has extended its sponsorship of all our Hedge Funds Club networking events in Singapore, Hong Kong and Tokyo until the end of 2014. “Ogier has been a valued partner for many years and we are very pleased that they have now committed to continue working with us on all our planned events in 2014,” said HFC’s chief executive Stefan Nilsson who founded the Hedge Funds Club in 2005.

Toshio Kobayashi has resigned from his gig as Head of Asia Hedge Fund Research at PineBridge Investments Asia in Hong Kong. Prior to PineBridge/AIG he was at Mizuho Corporate Bank and Sumitomo LIfe Insurance.

Nick Zhang (ex-Soros) has set up Magnolia Capital Management in Hong Kong and launched a China-biased pan-Asia equity long/short fund.

Ryosuke Maeyama, formerly a research analyst at online broker Monex, has joined Mitsubishi Corporation Asset Management in the marketing planning
department.

Elena Lau, COO of Richland Capital Management, is leaving the firm to become COO of a
start-up hedge fund. Hong Kong-based Richland shut down its two hedge funds in the spring. Lau joined Richland in 2010 and earlier in her career she worked at Merrill Lynch, Goldman Sachs and JP Morgan.

Naoki Iwami (ex-Nomura Asset Management, Millennium Capital, JP Morgan) has joined a former Nomura team at Whiz Partners in Tokyo to launch a new global macro fund in August.

Tetsuo Sasagawa has resigned from his post as a portfolio manager in the hedge fund investment team at Sompo Japan Nipponkoa Asset Management to join Standard Life Investments as an investment director. He joined Sojitz’s fund of funds team in 2004 which soon became Zest Asset Management and finally became part of the merged Sompo Japan Nipponkoa empire.