Samsung Asset Starts Quant Hedge Fund led by BlackRock Alumnus

  • Asia-focused fund is led by Hong Kong-based Chang Hwan Sung
  • It is Samsung Asset's first Cayman-domiciled hedge fund

A former BlackRock Inc. director is starting a hedge fund at Samsung Asset Management that uses computer models to bet on rising and falling Asian stocks, tapping growing demand from South Korean institutions to diversify investments.

The offering is the first Cayman Islands-domiciled hedge fund from Samsung Asset and will initially target Korean institutions for capital raising, its Hong Kong-based lead manager Chang Hwan Sung said in an interview. It began trading early this month with about $20 million of backing from Samsung Asset and another Korean institution, said Sung, who joined the money manager in June 2014 from BlackRock, the world’s biggest money manager.

Sung joined Barclays Global Investors, later acquired by BlackRock, in San Francisco in 2006 and arrived in Hong Kong four years later. He is the latest alumnus of Barclays Global Investors’s active equity strategies team to start an Asia-focused quantitative hedge fund. Others include Sensato Capital Management, a San Francisco-based manager which boosted assets to $1.8 billion by early December 2014. Christopher Lee, Sung’s former colleague in Hong Kong, last year started Zentific Investment Management.

Korean Demand

Samsung Asset is starting the fund as Korean institutions including the National Pension Service, Korea Investment Corp. and Korea Post Asset Management are introducing or boosting allocations to offshore hedge funds amid a weak domestic stock market outlook. Foreign funds have sold a net $1.9 billion of South Korean shares this year, driving a 5.9 percent decline in the Kospi stock index through Wednesday as weakening yuan, monetary policies in Japan and Europe weigh on the country’s exports.

“Overall interest for various hedge fund strategies has been growing in Korea,” Sung said. “Investors are looking for other strategies, other places other than Korea to invest.”

The Samsung Asset fund will initially trade stocks listed in Hong Kong, South Korea, Taiwan, Singapore and Southeast Asian markets, Sung said. Japan and Australia are expected to be added later, he added. Once the fund has built a performance record, it will seek to expand client base among international institutions, bringing a new source of hedge fund clients to Samsung Asset, he said.

Sung started a Korea-domiciled mutual fund targeting wealthy individuals and small institutions for Samsung Asset in October 2014. That fund uses computer models to pick stocks in the region outside of Japan. Unlike the offshore fund, investor protection clauses and local rules restrict its use of borrowings and high-turnover, expensive strategies such as those that exploit the abnormal pricing gaps between related securities, Sung said. The investment strategy of the new fund allows its managers to override computer-generated trading signals when they conflict with fundamental research, he added.

"We think we will be able to really use the traditional quant approach, with diversification among many different factors with the new fund,” Sung said.

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