Hedge Fund Awards 2015 www.acquisition-intl.com 51 Best Performing Long /Short Fund (3 years) & Best Asian Start-Up Fund We spoke to Han Ching Choong, Co-Founder and Portfolio Manager at Kriya Capital, to get the inside story on the firm’s successful Kriya China Fund – winner of two awards at this year’s Hedge Fund Awards The Kriya China Fund, which has been named Best Performing Long /Short Fund (3 years) and Best Asian Start-Up Fund in the Hedge Fund Awards, looks for multiyear landscape shifts in China, and the winners and losers that are most leveraged to those changes. “Historically, such changes have created anomalies that persist for a period of time, typically years, and at the right price and under the right conditions, these can create abnormal returns,” says Han Ching Choong, Co-Founder and Portfolio Manager at Kriya Capital. “We believe that the most sustainable returns are gen- erated by a portfolio of such positions. For example, the effect of a shift in China’s economic growth leadership away from ‘bricks and mortar’ towards higher quality, more sustainable drivers and the trend of capital being no longer free – the impact of these are significant and lasting, across many different industries from com- modities to retail, affecting corporate and consumer behaviour overtime. “Based on historical and continued dissection of the success and loss biases of the investment strategy, the Fund is concentrated in large-cap and ‘value’ names, where long exposures typically have a demonstrated history of pricing power under the right circumstances and the reverse is true for short exposures,” she continues. “The proprietary ‘Dashboard’ model that grew from this process en- sures there is a book of research that substantiates every position and that a core but dynamic matrix of criteria have to be satisfied before the position is initiated. This ensures that the investments are as asymmetric as possible in terms of their payoffs, where the downside risk is calibrated appropriately. Not surprisingly, very few positions ‘tick enough boxes’, as a result of which the portfolio is concentrated, with generally no more than 20 positions. The Fund aims for a meaningful bottom-up hit-rate and to-date, winners and losers have been in China and non-China markets, in different industries. We do not look for or invest based on market direction.” Kriya Capital places a lot of importance on automating key processes. What are the benefits of doing this? “‘Kriya’ in Sanskrit means following a path of discipline and deep exploration towards achieving perfect mental clarity and high-quality action,” explains Han Ching. “This is the basis for our investment process. “Asset prices, especially listed assets, are volatile and in the short-term, may not reflect any commensurate change in fundamental trends. With today’s multichan- nel modes of communication, it’s easy to get distracted by and react to headlines, losing focus on critical investment considerations such as what drives long-term re- turns. The discipline that an automated process instils helps to keep the investing brain (and action) on the ‘optimal’ path. But, critical as it is, this is only one part of the investment process and it is important to ensure that the process overall has an adequate degree of dynamism, given that change overtime is a certainty. So we are grounded by our process and investing experience, but are on our toes for changes that may be necessary.” Asked about current industry trends, Han Ching says that, in terms of investing, there is currently a relative lack of sustainable trends, macro and micro, compared to the past. “In terms of business, absolute return funds still carry a stigma from 2008 and institutions that used to invest in smaller funds have largely changed or disap- peared,” she says. “The investing institution as a whole seems to have migrated more towards a ‘self-protection’ mode, at least as much as helping clients to generate returns. In my experience, committees generally make decisions by defaulting to consensus and that sort of output is not necessarily correlated with optimal investments for their clients, even if it does protect the firm against a potentially irate customer and vigilant regulator. At the end of the day, people want sustainable returns on their savings and that is what we try to offer as that is also what we try to do for ourselves.” The regulatory standards for the investing industry in Hong Kong are high by global standards, and the regulators are vigilant, says Han Ching. “Investors should take more, not less, comfort from having their assets managed with the eye of the HK SFC on the manager. Hong Kong is getting more attractive by the day as a location for investing the way we do – as Chinese companies increasingly value investor relations, corporate access in Hong Kong has improved. While global companies are also increasingly valuing the potential investor base in China and access to them has also improved in Hong Kong.” Looking to the future, Han Ching says Kriya’s continuing success may see it grow over the coming year. “As investor interest is growing (both from institutions, family offices and high-net-worth individuals taking a more proactive approach to managing their wealth), we may need to expand the team in business development. As Hong Kong is a great place to manage money, we are also seeing interest in launching other funds.” n Email:
[email protected] Location: Hong Kong Tel: +852-39831238 www.kriyacapital.com Fact File Best Performing Long /Short Fund (3 years) & Best Asian Start-Up Fund Kriya Capital