SAIF-Linked Hedge Fund Triples Assets in First Eight Months

SPQ Asia Opportunities Fund, a Greater China-focused hedge fund affiliated with private-equity firm SAIF Partners Group, has more than tripled its assets since inception in December, according to documents sent to investors.

SPQ’s assets increased to $130 million from $40 million, according to its August and January newsletters seen by Bloomberg News. Gregoire Dechy, chief operating officer of Hong Kong-based SPQ Asia Capital Ltd., declined to comment because the information is private.

SPQ increased assets beyond the $100 million-mark as Asian hedge funds are outperforming global peers. The region’s hedge funds have attracted $4.1 billion of new capital this year after the Eurekahedge Asian Hedge Fund Index returned 4.6 percent in 2014, beating the 4 percent gain of its global gauge. The Asia index outperformed the global index in each of the last two years.

The equity long-short fund focused on Greater China is led by SPQ’s Chief Investment Officer Lin Ho-ping. It returned 5.1 percent this year through August and 1.6 percent in December, its first month, according to the latest newsletter. It primarily invests in Hong Kong- and U.S.-listed stocks. The MSCI China Index advanced 4.8 percent in the first eight months of this year.

SPQ is luring investors when Asia’s predominantly small hedge funds have been struggling to expand. Fifty-seven percent of the 167 regional equity long-short hedge funds, which began trading with less than $50 million, still managed below that amount after an average of 5.3 years in existence, according to a Citigroup Inc. report in December, citing data from Singapore-based Eurekahedge Pte.

Asia hedge funds started in the first seven months of 2014 raised $19.5 million on average, according to Eurekahedge.

Valuation Difference

SPQ’s largest single long and short investments in August involved pair trades of China-quoted yuan-denominated shares and Hong Kong-listed shares of a Chinese financial firm and a materials company, according to the newsletter, which doesn’t identify the companies. Shorting involves selling borrowed stocks and buying them back when prices fall for a profit. Pair trades seek to profit from valuation gap between two related securities.

Investors have been betting on the valuation difference between Chinese shares listed in Hong Kong and Shanghai to narrow under a plan to link the two cities’ stock exchanges announced in April and scheduled to start next month. The link will give wealthy Chinese investors a new way to access stocks traded in Hong Kong and foreign buyers an alternative route to Chinese stocks.

Beijing Jingneng

SAIF, based in Hong Kong, has invested in more than 200 companies, mostly in China and India, according to a fund document last year. Among those are Beijing Jingneng Clean Energy Co., the largest gas-fired power provider in the Chinese capital and Speciality Restaurants Ltd., an eatery chain in India. It bought a stake in China Huiyuan Juice Group Ltd. from Group Danone SA in 2010.

SPQ’s third-largest single stock holding is Nexteer Automotive Group Ltd., a Sagniaw, Michigan-based maker of hydraulic and electric power steering systems for motor vehicles. Beijing-government-backed Pacific Century Motors bought the former unit of General Motors Co. and auto-parts maker Delphi Corp. in 2010.

China Bets

The more than 100-year-old company, now run by a mixture of American and Chinese executives, went public in Hong Kong in 2013. Its more than 50 customers globally include GM, Ford Motor Co. and Bayerische Motoren Werke AG, according to a July statement posted on its website.

SPQ also favors health-care companies, which represent its third-largest long investment by industry, according to the August newsletter.

Lin was one of the earliest general partners of SAIF when it was formed in 2001, according to the fund marketing document dated October last year. The Harvard University-educated former lawyer was an investment banking vice president in the technology group of Credit Suisse Group AG before joining SAIF in December 2001, according to a biography on SAIF’s website.

SAIF was backed by Japanese billionaire Masayoshi Son’s SoftBank Corp. in its early years. SoftBank was a general partner in SAIF’s maiden fund, the Wall Street Journal reported in August 2005.

The SPQ fund’s second manager, Oliver Zeng, worked for China International Capital Corp.’s Hong Kong asset management unit and hedge fund Boyer Allan Investment Management HK Ltd. before joining SAIF in April 2012, according to last year’s marketing document.

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