Canning Park Capital, founded by former Gartmore Group Ltd. and GLS Capital UK LLP managers, plans to cap the size of its equity hedge fund at $100 million as it seeks to raise assets after outperforming peers.
The CCP Asian Opportunities Fund, which trades the equities of large-capitalization companies in Asia, has risen about 20 percent since it started trading on Sept. 15, said David Thompson, its portfolio manager who previously managed Gartmore’s European and Asian hedge funds. The MSCI Asia Pacific Index gained 8 percent during the same period, while equity hedge funds rose 1.8 percent this year, after returning 7.9 percent in 2010, according to Eurekahedge Pte.
“We’re much smaller, lighter more nimble, which means correlations with the markets are lower too,” Thompson said.
Canning Park is seeking to tap money that’s going into Asian hedge funds. Capital invested in the region’s hedge funds rose by more than $4.6 billion in the first quarter to about $88 billion, the highest since peaking in the second quarter of 2008, according to Chicago-based Hedge Fund Research Inc.
Canning Park, which is targeting institutional investors, will stop accepting money from new clients for 12 months once it reaches $100 million, Thompson said. The manager is marketing the long-short fund, which bets on rising and falling stock prices, after it started trading with the partners’ money, Thompson said, declining to provide details on the current size of the fund.
Some Chinese banking stocks are also cheap as “we’re getting close to the point where China’s tightening cycle is peaking ahead,” he said. Policy makers will raise borrowing costs only once more this year, after four increases in the past seven months, Goldman Sachs Group Inc. and Deutsche Bank AG predicted on May 12.
The manager is “cautious” about Australia’s prospects in the second half of the year as unemployment is set to rise, Thompson said. This will likely hurt companies that provide mortgage insurance, he said.
“We are seeing a lot of opportunities, both long and short,” Thompson said. “We are positioned for a pullback in markets.”
The fund focuses on liquid stocks with a market value of at least $500 million in Hong Kong, China, Australia, Singapore, South Korea and India, he said. It targets annual returns of 15 percent to 20 percent and seeks to change the direction or holdings in its portfolio quickly to adapt to the volatility in Asian markets, according to the firm.
Commodities plunged the most since 2009, and stocks posted the biggest three-day drop since March on May 5, on concern global economic growth is faltering. The euro plunged on that day after European Central Bank President Jean-Claude Trichet signaled he will wait until after June to raise interest rates again, wrong-footing some investors who had expected a quicker move to fight inflation.
“All of these asset classes are highly correlated,” Thompson said. “In a market like that, it’s quite hard to have a conviction, but there aren’t many other things to buy that offer you either value or yield beyond equities.”
Canning Park has partnered with Regal Funds Management, a long-short equity manager in Sydney which sold a 30 percent stake to a unit of Westpac Banking Corp. in July, according to the Singapore-based firm. Canning Park uses Regal’s risk- management system and back-office support, allowing the principals to focus on returns, Thompson said.
Jason Rich, Canning Park’s chief investment officer, was previously a portfolio manager at London-based GLS Capital, an emerging markets hedge-fund firm, and subsequently Bennelong Asset Management, a multistrategy hedge fund firm in Sydney.
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