HONG KONG - The Springs China Opportunities Fund, run by former Harvest Fund Management Co employees, is beating China's benchmark stock index by picking stocks that are overlooked by other funds and investment bank analysts.
The $98.6 million hedge fund, managed by Beijing-based Springs Capital Ltd., returned an annualized 20 percent since its inception in September 2007 through March, compared with an 18 percent loss for the Shanghai Composite Index. Its largest holding last year was Jiangsu Hengtong Photoelectric Stock Co Ltd, one of China's three-largest makers of optical fiber used for third-generation mobile networks whose shares more than tripled.
Asia's second-largest stock market is luring foreign investors eager to profit from an appreciating currency and an economy that grew 10.7 percent in the fourth quarter. The fund targets 700 A-share companies with a market value of $200 million to $3 billion, said Jenny Tian, co-manager with Chief Investment Officer James Zhao.
"The cornerstone of our investment philosophy is there isn't much value that can be extracted in a crowded space," Tian said in a telephone interview from Beijing. "We tend to look at stocks and sectors that are under-followed, under- appreciated and overlooked."
One of only a few Beijing-based hedge fund managers, Springs Capital was set up in 2007 by seven former colleagues, led by Zhao, who worked together at Harvest. Springs China Opportunities Fund trades yuan-denominated class-A shares, foreign-currency-settled class-B shares quoted in Shanghai and Shenzhen as well as Chinese stocks listed on international exchanges, especially Hong Kong. Stock picking accounted for 62 percent of its 103 percent return in 2009, Tian said.