AI Hedge Awards 2017

Acquisition International - Hedge Fund Awards 2017 33 Grand Alliance Asset Management Award for Innovation in Market Neutral Hedge Strategies: Sino Vision - Greater China Market Neutral Fund Grand Alliance Asset Management Limited Grand Alliance Asset Management (GAAM) is a Hong Kong based, Asia focused fund manager and investment advisor. We invited Evelyn Chen to tell us more about the firm and the investment products it offers. Company: Grand Alliance Asset Management Limited Email: [email protected] Web: www.gaamhk.com Address: 19/F, Hip Shing Hong Centre, 55 Des Voeux Road, Central, Hong Kong Phone: 852 2537 6862 HF170078 Grand Alliance Asset Management was established in May 1997, as both a Hong Kong SFC registered investment adviser advising on securities, Type 4 regulated activity and fund management company providing asset management and Type 9 regulated activity. The firm is made up of a team of finance professionals with extensive experience in global financial markets, particularly in the Greater China markets, including Taiwan, Hong Kong and China, with clients including high net worth individuals, fund of funds, institutions and pensions. Evelyn outlines the firm’s aims and how it works to achieve these and support its investors. “Here at GAAM, we aim to achieve consistent absolute returns, with a target annualized return of 10%+ and minimized risk (relatively low exposure to market risks). In addition, our overall mission is to become a leading investment manager in the Asia Pacific region. “To achieve these ambitious goals we utilise our many years of experience in successfully delivering alpha in both up and down cycles, by longing outperforming stocks and using index futures to hedge. Our dedicated and experienced value- investing team support us as we focus on Market Neutral and Low Delta Exposure investment strategies and Greater China shares markets, where we have an edge.” The firm’s award winning Sino Vision Greater China Market Neutral Fund is constructed to generate risk adjusted returns with low volatility and low downside risk. The Fund is targeting investors who seek Alpha without increasing the risk in their existing portfolios. Evelyn outlines the fund’s strategy and how it is focused around strong, risk adjusted returns. “Since inception in Jan. 2010 until Oct. 2016, the fund has generated 91.3% return (compounded annualized return 10.0%), outperforming MSCI Asia Index and HFN Market Neutral Equity Index by 75.9% and 67.1%. Gross exposure is normally in the range of 250-300% with net delta exposure below 10%. The beta of the portfolio is managed to be close to zero to minimize market risk. “Our edge is that we discover undervalued mid-cap stocks before other investors so that we can enjoy earnings and PE multiple expansion. We try to focus on the investment strategies that we are good at and minimize the investment approach we are not good at it, such as market timing and economy cycles. As such, we hedge market index to minimize those risks. As a result, our return is a measure of alpha. This strategy requires us to cover almost every sector and by doing that, we can discover the sector turning point earlier and also keep a nice balance of the portfolio. “The fund typically holds between 40 and 80 names, majority in Taiwan with a small China and US exposure, with the top 10 names typically accounting for 35% exposure. 70%-80% of fund’s positions are in mid-large cap stocks (over $500mn). The portfolio is well diversified to various sectors with a focus in technology and Greater China consumption plays. Core position sizing is around 4-5% with average position size around 2-3%. We focus on mid-cap as an area of inefficiencies and believe that our ability to identify under-researched and undervalued stocks much earlier than many other investors allows us the opportunity to participate in a much higher rate of multiple expansion as the market also eventually comes to identify these opportunities. The stock selection process involves top-down sector views and bottom up stock picking in each sector. “To minimize the downside risk, we have a strict risk management process that enables us to maintain our hit rate and minimize the effects of underperforming investments. If there is any deviation of the portfolio from its investment objective, restrictions and guidelines, risk managers are required to immediately communicate with the portfolio managers for immediate actions.” Looking ahead, Evelyn discusses the fund’s future focuses as the firm looks to build upon its current success. “Sino Vision is a market neutral fund which invests in Taiwan, China and China concept shares (listed in Taiwan, Hong Kong and the US) hedged by shorting index futures, so the performance of the fund is determined by our stock selections, not market directions. Sino Vision aims to deliver consistent absolute returns in excess of 10% per annum in both bull and bear cycles.”