Hedge Fund Monthly|
Interview with Jerry Wang, Fund Manager of the Vision Asia Maximus Fund
- Explain how the underlying hedge funds are selected?
We believe in an all-embracing method with top-down
and bottom-up approaches to search for investment-worthy
managers by studying the individual merits of each candidate
and evaluating its suitability with the overall portfolio.
We begin by filtering and screening, as extensive a variety
as we can gather, based on many aspects, such as strategy,
liquidity, length of operation, volatility, performance,
etc. We then shortlist from the universe of available
managers. With the shortlisted group, we dig into their
qualitative attributes from three perspectives: Investment
Disciplines, Investment Operations and Risk Control Disciplines.
To aid our manager evaluation, we conduct quarterly on-site
due diligence interviews around the world. In addition,
we gather industry news and intelligence through premier
commercial databases and established professional networks.
We input all the information gathered into our proprietary
Manager Evaluation Database to conduct a thorough and
comprehensive qualitative analysis of each manager.
In addition to qualitative analysis, we also look into
the quantitative attributes to examine a manager's suitability
in the overall portfolio. We use an internal quantitative
portfolio optimisation model as well as other types of
analyses, such as conventional correlation, efficient
frontier, regression analysis, etc.
The selection process is on going. We conduct regular
and vigilant monitoring to decide on possible appointments
of new selections and/or terminations of the existing
- Breakdown of the strategies employed and percent of
NAV. Please state what you look for in a manager/fund in
a. Equity Long/Short
b. Relative Value (market neutral)
c. CB Arbitrage
d. Multi-Strategy Arbitrage
e. Event Driven
f. Distressed Debt/Securities
h. Fixed Income
| Strategy (for the month of Oct, 2003)
| Long/Short Asia ex-Japan
The objective of the fund is to achieve long-term capital
appreciation by investing in multiple investment programmess
in the Asia-Pacific region. We practise diversification
at both the strategy and underlying funds level. Therefore
under each strategy, we search for investment managers
that are diverse in style to ensure minimisation of the
How long do you monitor a hedge fund manager before
making an initial investment?
It varies; on average three months after our initial
due diligence interviews.
- How large is the initial investment?
Depending on the manager's quality, length of track
record, performance volatility, and liquidity, the range
of our initial investment is usually from 1% to 3.5% of
- What is the process of increasing investment from the
We conduct on-going monitoring on the qualitative and
quantitative performance of each manager. We may increase
investment if the manager complies with its investment
process and outperforms its peers in the same category.
- What information do you require from the underlying
funds? How often is this information required?
We request timely updates from our managers. We receive
newsletters, weekly NAVs, monthly exposure reports and
monthly return attributions from the managers for our
own computation, monitoring and control. However, we do
not require all managers to provide full transparency
on their holdings. We aim to reduce portfolio risk/exposure
through effective diversification.
- How often do you visit the underlying managers? And
examples of questions asked?
We visit our managers at least twice a year at their
offices. In between, we conduct formal conference calls
with each of them on a monthly/quarterly basis or whenever
necessary. The questions asked depend greatly on the type
of strategies, as most technical questions would be market
related or strategy specific. However, we do have a set
of questions that we direct to each manager. Examples
of the general questions include their staff turnover
and new hire, their funds' asset inflows and outflows,
capacity targets and current outlook.
- Please explain the background of the manager(s) and
analysts for the fund. If preferred, please attach CVs
Jerry Wang and Ronnie Wu are the directors/managers
of the fund. Jerry brings with him 12 years of experience
in the asset management industry with extensive experience
in both traditional and alternative investment strategies.
Prior to founding Vision, Jerry worked at Merrill Lynch
and Scudder Kemper Investments. Ronnie has over 10 years
of experience in the asset management industry, of which
six years are in the management of fund of fund (FoF)
programmes. Since his joining in VIM, Ronnie has applied
the skills learnt from his previous experience and spearheaded
the construction and enhancement of the investment process.
Prior to joining VIM, Ronnie worked at UBS and Chase Manhattan
Global Asset Management.
Our analysts are divided into quantitative and qualitative
analysis, as well as risk management control. Their previous
engagements with top-notch investment companies, financial
analysis service providers, family offices and investment
research companies had granted them in-depth knowledge
about the Asian markets as well as the hedge fund strategies
in the region. The analysts have applied their effective
analytical expertise to innovate and develop a number
of proprietary evaluation platforms for the manager due
diligence and selection process, portfolio construction,
asset allocation, and risk management.
- Risk management: Explain in detail what type of risk
management systems are employed by the manager(s). How often
is this analysed?
We recognise the business risk inherent in hedge funds.
We apply stringent risk management guidelines at both
the strategy and underlying funds level on a weekly basis,
utilising quantitative systems including Exposure Report,
Liquidity Report, Scenario Analysis and Portfolio Optimisation
Our Risk Control Guidelines:
At fund level,
- Changes in total asset management
- Performance monitoring by tracking the annual Rate
of Return (RoR) and monthly RoR
- Analysing the risk and return profile by calculating
the compounded RoR, arithmetic mean RoR, standard deviation
and Sharpe ratio
- Conduct drawdown analysis
- Run regression on monthly analysis against relevant
index to generate Alpha and Beta
- Implement stop-loss limit from monthly and rolling
12-month performance perspective
At portfolio level,
- The fund should contain a minimum of 15 managers in
6 different strategies at all times
- No single manager to exceed 10% of the fund NAV
- No single strategy to exceed 30% of the fund, except
long/short equity strategy
- At least 75% of managers allocated should reside within
the Asia Pacific region
- At least 50% of total portfolio assets should have
monthly liquidity. Monthly liquidity reports are used
to track total liquid assets within the investment portfolio
across 30, 60, 90, 180 days
- Apply stress test and scenario analysis to produce
risk and return projections and follow the allocation
that will deliver the targeted risk and return
- Monitor country, gross, long and short, equity and
non-equity exposures on a monthly basis
- Monitor and enhance overall portfolio performance
characteristics: standard deviation, Sharpe ratio, Alpha,
Beta, correlation coefficient, etc.
- Please provide a correlation matrix of the underlying
funds in the portfolio; or, if preferred, a general statement
on the correlation of the underlying funds in the portfolio.
Please see attached .
- Please describe the differences between building an
Asian FoF vs a Japanese FoF? Is it more difficult to find
suitable Asian hedge funds vs Japanese equities long/short
given that some view Asia as a harder place to operate a
hedge fund compared to Japan where markets are deeper and
Comparatively, it is easier to build a Japan FoF than
an Asian FoF because Asian FoF talents are harder to find.
However, in terms of investment value, Asia offers abundant
investment opportunities and attractive Alphas to skillful
managers within the less efficient financial markets.
In addition, a Japan FoF tends to be highly concentrated
in Japan-only long/short equity whereas a pan-Asian FoF
would offer more diversification.
- Japan hedge fund performance: Is there any difference
in performances and styles between Tokyo, London and US-based
Asian fund managers?
In general, US and London-based Asian fund managers'
investment process tend to be more top-down driven. They
realise the disadvantage of not going underground; therefore,
they usually adopt longer-term themes coupled with macro
views. Asia-based managers live in the same time zone,
breathe the same air and are able to capture timely market
intelligence. Proximity to markets and local expertise
provide Asian managers an information edge over the overseas-based
managers. Therefore, Asia-based managers, in general,
are more bottom-up driven. Having said that, we are not
necessarily biased towards Asia-based managers. The information
advantage is more applicable to certain types of strategies,
but not to all.
- Do you already invest in any China hedge funds? Do
you intend to?
- Would you diversify the strategies you invest in? For
example, would you consider adding a macro manager to your
The core of our value lies in diversification. We believe
we can generate attractive returns in Asia and reduce
volatility by using the multi-strategies and multi-managers
approach. Therefore, we do not exclude any strategies
that focus in Asia. At present, we have allocations in
Asian macro managers.
Diversification has worked well in our fund. Since inception
in April 2002, our Vision Asia Maximus Fund has delivered
returns of 16.93%, which outperformed the benchmark MSCI
Asia Pacific Free Index returns of 3.93% over the same
period. Also, our percentage of positive months has reached
82.35%, as compared to the index's 47.06%, reflecting
our fund's relatively superior returns. In addition, despite
the sizable outperformance, our fund has taken on significantly
lower volatility, as illustrated by our standard deviation
of 3.75%, as compared to the index's 16.20%.
Vision Asia Pacific Limited
852 2878 3600
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