Singapore-based AQG Capital Management is all set to launch its market-neutral, pan-Asia equity quant fund at the beginning of September.
The Able Quant Master Fund, which starts with a seed capital of $100 million solely provided by Korean firm Hyundai Securities, is one of the more highly-anticipated hedge fund launches in the region this year given the size of funding it has already attracted. The Monetary Authority of Singapore is understood to be issuing AQG’s hedge fund license shortly.
The market-neutral long/short strategy will initially trade across Asian liquid markets such as Korea, Hong Kong, Japan and Australia but will eventually diversify exposures to include other markets around the region. The focus of the strategy will always be pan-Asia and not on any single market in the region, according to the managers.
AQG chief investment officer Hongshik Kim says the strategy is relatively less trading-oriented compared to other quant funds since it will limit portfolio trading to only once a month using a quant-based multi-factor model to select stocks in the four Asian markets to populate the portfolio.
AQG’s proprietary multi-factor model was developed based on the experience of the team’s individual managers over the years. It inputs various factors numbering in the thousands to determine quantitatively which Asian stocks to buy or sell short.
AQG will start marketing the fund to investors three to four months after launch and will soft close the strategy once it has scaled to a $1 billion size. “We have to establish a good track record of delivering consistent and stable risk-adjusted returns,” said Kim.
The strategy targets a conservative Sharpe ratio of between1.5 and 2 and an average yearly return of 13-14%. Kim says that a back-test indicated a hypothetical return of least 9% in the first seven months this year from the unique trading model.
Before joining AQG, Kim was the chief investment officer of K3 Capital Management, a pan-Asia multi-strategy hedge fund that he established in 2006 after leaving ABN AMRO.
The fund delivered a high double-digit return in 2007 but took a hit in 2008 following market turmoil as a result of the Lehman Brothers bankruptcy.
Before K3, he successfully headed ABN AMRO’s Asian equity-linked platform from 2004 to 2006. He had also served as a senior executive vice-president at Shinhan Securities, the investment banking arm of Korea’s third largest listed financial group, where he oversaw all equity and fixed-income trading divisions. He holds a doctorate in finance from the University of Missouri-Columbia
The other members of the AQG investment team are former Korea Investment Corporation (KIC) portfolio manager Minsoo Seo and former Shinhan Bank prop trader Sung Won Oh.
Seo used to run a $1.5 billion equity portfolio at KIC while Oh is considered one of the most experienced traders in South Korea. The firm has also hired two other junior analysts and appointed former Korea Technology Bank executive Daero Won as its COO. The group has selected Goldman Sachs and Morgan Stanley as its prime brokers while Citco has won the mandate to administer the fund.