Yu Bin, a former managing director at China’s sovereign wealth fund, plans to start a fund focused on Greater China equities, said three people with knowledge of the matter.
Yu resigned from Beijing-based China Investment Corp., also known as CIC, earlier this year for personal reasons, said the people, who asked not to be identified as the information is private. He will remain based in China and his long-biased fund will primarily bet on stocks whose prices are expected to rise, they said.
Institutional investors globally have been scouting for China-based managers with international experience, who can pick stocks set to benefit from growth in the world’s second-largest economy without charging hedge-fund fees that are typically higher. The Columbia, Harvard and Princeton university endowments, and the Ford Foundation are among those that now have their own quotas to invest in yuan-denominated stocks traded on China’s exchanges.
“For anyone interested in value and performance over the long term, this should be a great opportunity for managers, such as Yu Bin, looking to launch long-biased China funds,” said Alex Mearns, chief executive officer of Singapore-based data provider Eurekahedge Pte.
Worries about a Chinese economic slowdown have depressed valuation of the nation’s companies. The country’s benchmark Shanghai Composite Index (SHCOMP) trades at about eight times this year’s estimated earnings and the Hang Seng China Enterprises Index (HSCEI) at about 7.4 times, compared with 16.5 times for the Standard & Poor’s 500 Index (SPX), according to data compiled by Bloomberg.
Yu was a managing director of public equities at CIC, running its direct stock investments, said the people, who also confirmed a LinkedIn profile. His department also allocates money to outside long-only stock funds, they added.
CIC, which was set up to help boost returns on the nation’s foreign-currency reserves, oversaw about $650 billion of assets at the end of last year, Sina Corp. reported on its website in February, citing the fund’s Chairman Ding Xuedong. The market value of its overseas investments topped $200 billion, the report said.
Yu joined CIC in January 2009, according to the LinkedIn profile confirmed by the people. He was head of global equities at Guangzhou-based Guangfa Fund Management Co. and a managing director at long-only fund manager Eagle Capital Management LLC in New York before CIC. He also worked for consulting firm McKinsey & Co.
There has been a steady flow of New York- or London-trained Chinese returnees to the nation’s asset management industry over the years, said Will Tan, a managing director at Singapore-based recruitment company Principle Partners Pte.
“They have a better understanding of what is needed in terms of compliance, risk management, marketing, investor relations,” Tan said.
Most of the China hedge and long-biased funds tracked by Eurekahedge are based in Hong Kong, said Mearns. Yu’s fund may fill a gap between them and money managers educated and based in China who have failed to attract international institutional followings.
An Eurekahedge index of Asia-Pacific-focused funds that do not sell borrowed stocks returned an estimated 3.6 percent in the first five months, according to preliminary data, after a 13 percent gain last year and 21 percent return in 2012.
CIC was ranked the fourth-largest state fund globally based on an estimated $575.2 billion of assets, behind peers in Norway, United Arab Emirate and Saudi Arabia, according to the Las Vegas-based Sovereign Wealth Fund Institute.
Thirty-two percent of CIC’s overseas investment at the end of 2012 was in public equities, according to its annual report, released in July 2013. It has yet to publish detailed financial figures for 2013. CIC also holds the government’s stakes in the nation’s biggest banks and brokerages.
Yu studied physics at Peking University, and went on to earn a doctor’s degree in the same subject at Brandeis University, according to the LinkedIn profile confirmed by the people. He also studied management science at Columbia University’s business school.
CIC’s overseas investments returned more than 8 percent last year, Vice President Liang Xiang said in March. It reported a 10.6 percent return on overseas investments for 2012 in the annual report for that year, taking annualized return since its September 2007 inception to 5.02 percent.
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