|HFM : China’s Longrising opens to overseas investors||
The Beijing-based investment firm has launched a fund on Hong Kong’s OPIM platform which will replicate its onshore long/short China-related equities strategy.
Longrising Asset Management, the Beijing-based investment house, is opening up to foreign investors by launching a Cayman-domiciled hedge fund on the OP Investment Management (OPIM) platform in Hong Kong. In China, Longrising manages equity long-only products with assets under management (AuM) of more than RMB 20bn.
The Longrising Prosperous China Fund, led by former China Life Insurance and China Life Asset Management portfolio manager Zeng Xiaojie, will replicate Longrising’s strategy in the China A-share market which is a long/short strategy mainly investing in China-related equities listed in China, Hong Kong, and US stock markets.
Zeng’s investment process begins top-down where he attempts to analyze the situation of China’s business cycle, before moving down a layer to look for sub-sectors with economic growth, before taking a micro perspective where he will elaborately select dividend-benefited stocks from industries and sub-sectors to achieve a decentralized distribution. This results in a portfolio of about 5-10 heavily held stocks, with about three stocks in each industry for a diversified allocation.
“The overall position will be able to use share price index futures to hedge business cycle risks of the major market, and the stocks within the industries can also capture the opportunities of internality structural differentiation through a flexible long-short strategy,” Zeng explained via email. “The overall short positions will not exceed 50% of the net asset value, and the leverage ratio will not exceed 150%.”
Zeng pointed to a few factors to explain the drivers behind the fund’s investment thesis. He said that the overall growth rate of China’s economy has entered a mid-to-long term stable state after continuous decline in 2011-2016. Added to that consumption has become a new driving force in place of investment making GDP growth more robust.
“[As China’s] traditional industry enters a recovery cycle along with the economy, competitive companies, such as advanced manufacturing companies, will have more structural opportunities and achieve the concentration effect of a certain market share,” Zeng said. “Overall, this stage will bring certain revenue opportunities due to consumption upgrades, economic stabilization, and leading aggregation.”
The onshore Longrising fund managed by Zeng from July 2008 to 31 Dec 2017 has achieved an annualized return of more than 25%.
Alvin Fan, CEO of OPIM, commented: “We are now seeing increasing top-tier Chinese fund managers landing overseas markets. We believe that an excellent strategy, coupled with institutional-grade technical and operational supports, will help these top managers replicate the same credibility and success with global investors as they do onshore.”
The Longrising Prosperous China Fund is being launched with AuM of $5m from Zeng and a high-net-worth investor. The firm has a target AuM of $20m in the first year, and an expected capacity of $1bn, taking into consideration the diversification and liquidity of the portfolio.
Longrising will offer a ‘Founder Class’ share with 1% management fee and a 12% performance fee with a 1-year hard lock-up, and 1-year soft-lock with 2% redemption fee; a Class B share with 1.5% and 16% on a 1-year soft-lock with 2% redemption fee; and a Class C share with 1.5% and 20% on a 6-months soft-lock with 2% redemption fee.
Longrising is OPIM’s third fund online in 2018 after having launched a total of 12 funds in 2017.