Canning Park Capital, founded by former Gartmore Group Ltd. and GLS Capital UK LLP managers, plans to start a hedge fund that will trade the equities of large-capitalization companies in Asia.
The Singapore-based firm, which also has an office in Sydney, will start the CCP Asian Opportunities Fund on Oct. 1, said David Thompson, its portfolio manager who previously managed Gartmore’s European and Asian hedge funds.
Equity hedge funds were among the strategies that attracted assets in the second quarter as investors allocated more than $360 million in new capital to Asian hedge funds, Chicago-based Hedge Fund Research Inc. said. Asia offers higher returns as correlations between markets are low relative to other regions, with Indonesian stocks outperforming China’s by 60 percent this year a good example of that, Thompson said.
“One of the reasons why we like Asia is the country effect in the region is very significant,” he said in an interview today. “They’re a big driver of returns.”
Poor corporate governance, different monetary policies, listing requirements and regulations contribute to “structural inefficiencies” in Asia, he said.
The fund, which will start with money from the principals as well as family and friends, is also getting seed capital from an Asian pension fund, Thompson said, declining to provide details about the investor and size of the fund because of a non-disclosure agreement. The long-short fund, which bets on rising and falling stocks, will have a capacity of at least $300 million, he said.
The fund will focus 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.
It will be a “nimble, trading fund” that can liquidate positions in a day and will use a maximum leverage, or borrowing, of only 1.2 times capital, Thompson said. The manager aims to have 20 to 40 positions in the fund, he said.
“The focus is on preserving capital and only being aggressive when we feel conditions are right in the market for stock-picking,” he said. “We have a fundamental view but to not fall in love with positions or get stuck in them.”
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 Group in July, according to the Singapore-based firm. Canning Park will use Regal’s risk- management system and back-office support, allowing the principals to focus on returns, Thompson said.
Thompson, 37, was a senior fund manager at Gartmore Investment Management’s European hedge fund business. He left the firm in September last year and set up Redhill Partners, a Singapore-based private investment firm with assets in Australia, Singapore, Mongolia, Hong Kong and China.
Jason Rich, 34, 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.
James Hyndes, Canning Park’s head of research, also worked at Gartmore in Singapore before starting Redhill with Thompson. His earlier stints included research and equity sales positions at Goldman Sachs Group Inc., Macquarie Group Ltd. and JPMorgan Chase & Co. in London, Hong Kong and South Korea. Hyndes, 40, is a co-founder of Redhill Education Ltd., a Sydney-based education company, whose stock rose 20 percent on its first day of trading on the Australia stock exchange on Sept. 21.