|
1.
CHINA HEDGE：
你们公司的背景和历史如何？你们公司的投资哲学和投资风格又是怎样的？
FRM
Hong Kong Limited首席执行官
区景麟博士，荣誉勋章：FRM是Blaine Tomlinson于1991年在伦敦成立的私人家族办公室和对冲基金研究顾问公司。如今，我们是对冲基金中的基金类别中最大的独立机构之一，亚洲不少地区均有我们的办事处，包括分布在日本、香港、韩国和澳大利亚。
Blaine在花旗、野村和AIG专门负责衍生产品达20年，然后开始对对冲基金产生兴趣。他离开AIG后，决定将他自己的部分资金用于投资，并挑选了两只基金：一只是享负盛名的传统基金，另一只是对冲基金。
早在90年代初期，大多数人认为对冲基金是高风险的投资工具，而传统基金则安全得多。在首次表现回顾中，传统基金虽录得亏损，但仍很高兴，因为跑赢了股票指数。相反，对冲基金虽录得利润却依然致歉，因其认为在当时的境况下本可以挣取得更多。
这次经历完全颠覆了Blaine对与对冲基金和传统工具相关的风险的理解。他也因此而深受鼓舞，随后创立了一家公司专门研究对冲基金行业，并物色潜在的投资机会。
FRM认为，对冲基金是资产管理中一种更有竞争力的模式。对传统基金而言，风险在于跟踪误差，而对于对冲基金，风险即为亏损。对冲基金致力于抓住上升机遇，同时控制下跌风险，长期来说，这通常会带来较好的回报/风险特征。
我们的投资哲学正是建立在我们对对冲基金相比于传统工具的风险/回报特征的理解上。在我们已经过历史反复验证的信念之中，对冲基金更为灵活和可通过运用更广泛的投资策略产生绝对回报。不过，个别对冲基金的波动性可能较高，风险较大，而这恰好反映出对冲基金的基金的优势所在。一只优秀的对冲基金中的基金能融合各种不同的策略，以求带来更为稳定的回报和使其风险減至最小。
就我们的投资方法而言，我们致力于辨识和投资于回报稳定同时下跌风险有限的最佳对冲基金。风险管理与投资组合管理同样重要，这是因为风险管理可通过减少出现亏损的期间从而带来长期回报。我们也会分散投资于各类策略，以求減低其相关性，这能有效地减少波动牲和带来更高的风险调整后回报。
2. CHINA
HEDGE：你们在哪些领域进行投资？你们的投资组合涉及哪些国家？你们的投资程序又是怎样的？
区博士：我们不会将自己局限于任何策略。我们会在全球众多策略中物色机会，但我们不会同时对所有策略进行投资。我们对特定策略的配置取决于我们对这些策略的理解以及如何将我们的观点转化为资产配置。
我们的投资程序如下：
- 我们的基金研究分析师会在其专业领域对所有对冲基金进行尽职审查。这一过程通常会先使用专有定量筛选工具，对我们多达10,000多只对冲基金的庞大数据库进行筛选，从绝对表现和相对其他基金的表现上分析基金的风险、回报和相关性特征。
- 我们会通过对基金经理的面对面会议、经纪商的资金引荐会议(Capital Introduction)和行业研究对基金进行定性分析，从而为定量分析提供支持。这是一项非常费时间的工作。 我们每年要拜访400多位新基金经理，包括召开1,000场次尽职审查会议，并与基金经理每年进行4,000多次沟通。
- 我们会对较出色的基金进行进一步分析和尽职审查，方式通常是拜访团队成员，更细致地分析基金如何产生回报，以及区分该基金与同类基金的不同之处。
- 如果分析师强烈推介一只极具潜力的基金，则由投资风险团队和运营风险团队进行正式评估。这一过程中我们亦会与基金经理进行多次会面，并对数据进行分析。风险管理团队可全权否决某项投资，并可在此阶段中止对有关基金继续进行投资程序分析。
- 假设风险团队并未行使否决权，则分析师会向投资团队的最高级成员推介该基金。如一致同意，则基金会纳入我们的“投资池”（事实上就是对冲基金买入名单）。目前全球数以千计基金中仅有约100只被认为是优秀的，可以纳入投资池。
- 随后，我们的投资组合管理团队挑选投资池中的基金來构建投资组合，以满足其委托投资的需要。投资组合管理团队有本身的各种预设优化工具，以确保最有效地进行资本配置。
- 當基金仍在投资池中时，基金研究分析师和风险团队将定期监控该基金，以确保基金质量并未下降，或基金并未承担过多风险。
3. CHINA
HEDGE：与单一对冲基金相比，对冲基金的基金有甚么优势和弱点？你们对对冲基金中的基金的双重收费结构有何看法？
区博士：对冲基金中的基金与对冲基金有着很大的不同。单一对冲基金的回报具有高风险性，并承受特定市场的风险，而有效多元化的对冲基金中的基金投资组合风险较小，承受有限的市场因素风险。对冲基金中的基金集众多能够互补长短的对冲基金风格和基金经理于一身，可打造出特定的回报模式。对冲基金中的基金收费并非双重收费――而是有价值服务的收费。对冲基金中的基金可带来特定的回报，这与单一基金的回报很不一样。
投资对冲基金需要运用适当的资源。对冲基金行业从复杂性和多样性而言，与传统基金截然不同。分析对冲基金不同的买卖技术需要极高的技巧水平，这需要具备丰富买卖和投资经验的专家。此外，为更好地监控对冲基金及确定其是否违反风险指引或出现其他运营问题，还须有良好的投资基础设施。我们提供的策略分析专业知识和对运营方面的尽职审查证明我们的收费是合理的。
使用替代对冲基金中的基金的办法是进行相似程度的内部尽职审查。但对大部分投资者而言，自己做严格的尽职调查只会产生庞大的成本，除了少数的大型机构。
4. CHINA HEDGE：你们基金的风险/回报目标是什么？你们的产品适合哪一类的投资者？
区博士：FRM提供所有全天候和特定策略投资的组合，既适合机构投资者也适合个人投资者。我们拥有专为私人财富领域设计的特色产品系列，此外，我们也设有一项名为FRM资本顾问（FRM Capital Advisors）的对冲基金种子业务，从而为发掘新的基金而提供的渠道。
我们的产品可分类为：
- 多策略产品，这种产品旨在于市场周期中在维持低波动性及与传统资产类别的相关性接近于零的情况下带来持续较现金为高的回报。这类投资组合广泛投资于各种相关对冲基金和策略。
- 股票长短仓投资组合，这类投资组合旨在通过投资于具备卓越的选股和风险管理能力的基金，通过在牛市中分享大盘的上涨和限制曝露在熊市中下降的风险，从而取得超越股市基准指标的表现。
- 信贷投资组合，这类投资组合投资于在信贷市场中应用基础研究技术的基金，以求不仅是在上升市，而是在整个信贷周期内获取回报。
- 方向性交易投资组合，这类投资组合在传统资产表现欠佳的高波动期间仍有不俗表现，这从2008年明显可见。就此而言，2009年3月，我们的CTA投资组合荣获InvestHedge颁授的“最佳管理期货基金”奖。
我们也会为大型机构客户提供个别定制的投资组合。
我们所有的投资组合均为特定的客户需求而设计。例如，我们为我们的高资产净值客户设计了能满足他们需要的产品。其中一个产品就是结合我们的多元化策略和交易策略，这个产品正是我们的一些高资产净值客户想要的。
5. CHINA HEDGE:
你们为投资组合挑选对冲基金的标准是什么？你们在投资组合中移除基金的标准又是什么，你们的标准是否启动过？
区博士：我们要求基金要有一套可重复应用的投资程序，具备投资优势或技巧令其能在较长的一段期间内取得稳定的超额回报。我们看重五个方面：人员、机构、资产筛选、投资组合建设和风险管理能力。
这过程非常严格，包括大量的尽职审查工作。我们分析了数千只对冲基金，但目前投资的仅有100只左右。
我们认为选择合适的时机退出也是十分重要的。我们确实会因以下各种原因定期赎回基金：
- 我们不再认为该基金有投资优势；
- 我们认为基金正承担着过大的风险；
- 违背投资或风险指引；
- 拒绝提供充分透明的资料；
- 关键人员离职；
- 投资策略预设的机会不适合当前环境。
过去10年里，所有以上的标准曾导致基金赎回，其中有些标准的应用频率相对较高。
6. CHINA HEDGE: 在不同策略间进行自上而下的资产配置是对冲基金中的基金关键因素。在根据不同市场条件确定你们的投资主题时，你们会采取哪种研究方法？而哪些因素又会令你们从一种策略转向另一种策略？
区博士：我们通过两个不同阶段进行从上而下的配置。首先是我们的策略配置程序，在此过程中，我们的分析师会根据风险偏好、风险规避及风险稳定这三种主要经济环境來预测我们投资组合内的各种对冲基金的期望收益。我们对期望收益的预期是结合了与对冲基金经理的讨论和策略分析而得出。这是一个从下而上的程序，对确定我们所看好的基金和策略是很重要。从上而下的角度看，我们的顶尖投资人员会分析宏观主题和变量，并探讨我们的投资组合应如何作出回应。随后，所有投资人员将开会深入讨论这些问题，而我们的首席投资官及其他高级投资人员对配置目标而作出决定。
我们的投资执行委员会（我们的高级投资团队）会频密地和持续地跟进配置情况，并根据市场条件进行调整。
由一种策略转换为另一种策略的触发因素有很多，但通常都是取决于市场前景。例如，2008年2月爆发金融海啸后，对冲基金的融资就成为了大家关注的问题。过度使用杠杆的对冲基金易受到投资银行/主要经纪的受压所影响。从那时起，我们便提前开始赎回那些过度依赖杠杆的基金，这种情况在相对价值策略中最为普遍，所以我们便大幅减少这一策略。
7. CHINA HEDGE:
与其他同行相比，你们公司和你们基金有甚么独特之处？
区博士：跟其他类似的对冲基金相比，我们的竞争优势在于：
- 经验：
FRM的主要投资人员均具有丰富和广泛的经验，在为机构客户管理基金的基金投资组合方面积累逾10年经验，这是我们明显的竞争优势。
- 所有投资决定均有着严格的程序
：
基金筛选、构建投资组合、风险管理和监控，並包括一个受高度重视、独立运作的运营尽职审查团队。
- 独立性
：
FRM与相关对冲基金并不存在任何市场推广协议、交易关系或佣金安排。我们在选择基金时不会有带来利益冲突的动机。同样，FRM由其创办人拥有，不存在须向更高级别母公司报告的问题。我们唯一的投资重点是对冲基金中的基金。
- 表现
：
尽管2008年困难重重，我们过往10年的风险调整后回报均录得正值的回报，以及我们对传统市场有较低的beta值，使我们得以独树一帜。
- 认同
：
我们的资产基础主要涵盖许多大型， 蓝筹机构（保险公司、退休基金、银行和资产管理公司），我们备有多种主要為客户定制的委托投资服务，以提供服務給以我們为其对冲基金产品唯一供应商的客户。
- 业务稳健
：
我们的资产负债状况稳健、基础坚实、客户稳定，这些都有助于我们在这时期中保持强势，而当目前的金融海啸结束后，我们将具有更大的竞争力。
- 全球性
：
在2000年我们在亚洲设立了第一个办事处，现在我们在此地区设立的网点规模属对冲基金的基金最大规模者之一，我们相信亚洲是一个十分重要的地区。我们认为，全球化视野带来的多角度让我们公司相比其他只集中于单一地区的同业公司更具优势。
8. CHINA HEDGE: 在如此波动的市场中，风险管理对基金经理而言至关重要。你们基金如何确保将风险控制在你们风险指引的范围内呢？
区博士：FRM相信风险管理是对冲基金投资的基石，这在我们的公司名称中即有体现。因此，我们的研究分析师着重选择能出色管理风险的基金经理。此外，我们也设有一个独立的风险小组，这个小组可基于风险相关原因完全独立地剔除或减持基金。我们会从运营风险、交易风险和资产流动性与融资风险这三个主要方面进行持续监控和分析。
监控这些风险管理程序的结果以及对相关基金表现的分析，须进行‘异常情况报告’程序。在此程序中，当相关基金具有与其委托投资不相符的风险敞口，或当表现背离根据同业和历史分析厘定的‘预期’水平时，将进行系统分析。
FRM采用多套系统，包括从直接应用，如资产流动性分析、杠杆比率监控、板块配置与建议目标配置的比较，和集中性分析以至先进的风险管理工具，为求协助建立和监控我们的投资组合，并对其进行压力测试。
对于运营风险，我们设有一个独立的业务风险小组，对投资组合中每只基金进行全面分析和定期审查。他们拥有独立的否决权，可剔除他们认为不满意的任何基金。他们对五个方面进行分析：业务风险、运营风险、人员风险、欺诈风险和监管风险。这是一项劳动密集工作，涉及与基金经理直接会晤、与服务供应商进行讨论，及伏案审查文件。程序的重点是避免欺诈行为，而我们的程序更是全面的，并力求在对冲基金的运营架构中找出任何潜在弱点。
9. CHINA HEDGE:
有很多人批评对冲基金与对冲基金中的基金间的信息不对称。例如，麦道夫（Madoff）声称自己是CTA基金经理，但他们以机密为由从未向投资者披露过交易模型。不仅麦道夫，其他著名的CTA或量子基金也很少向投资者披露他们的策略。你们是如何解决这个信息不对称问题的？作为一只对冲基金中的基金的经理，关键是要了解基金的策略以及相关风险。你们是如何建设团队以更好地了解不同的策略以及相关风险的？
区博士：在未获得足够透明的资料，和对其投资及运营程序得不到完全满意之前，我们是不会对任何基金作出投资的。了解一种策略主要有两个途径。
第一，我们雇用过往任职于对冲基金和投资银行的交易员和投资人员，这样我们的员工就拥有与该基金经理所用的相同交易策略來进行交易的经验。第二，我们会要求有足够的透明度以了解策略，包括如何筛选证券、有关持仓类型的数据以及风险水平的方法。我们利用这些信息检验策略与基金表现是否相符。完全的持仓透明并不一定是必要的，但透彻了解基金的盈利方式则总是必需的。
10. CHINA HEDGE:
你们的投资组合有没有投资于中国的对冲基金公司？你们对大中华区的基金公司有何看法？他们一般的优势和弱势是什么？他们在哪些领域还能进一步提升？你们来年对大中华区基金公司的投资是增加还是减少？理由是什么？
区博士：FRM过去曾将投资配置于专注中国的对冲基金，我们会继续通过地区配置间接投资中国。我们希望可防避该策略所带来的波动，同时能够享受中国经济增长的成果。一般来说，我们认为大中华区的基金经理擅长基本研究，对影响市场的宏观因素也有深入了解。不足之处在于，中国股市近年来表现相对强势但与其他地区相比，风险管理和对保本的专注还有待提高。因此，许多基金的下跌幅度有时过高，令回报模式与我们所寻求的并不匹配。
经历信贷危机后，我们希望看到基金经理实施更严格的风险控制，并希望市场推出更多对冲工具帮助基金经理实现这一目标。鉴于中国经济状况相对稳健，可能会拉动大中华区经济率先复苏，因此我们目前正评估大中华区一些较有潜力的基金经理。由于在目前中国经济何时复苏仍不明朗，或者说目前的危机会持续更长是，我们更偏重一些注重保证本金安全的基金经理。
11. CHINA HEDGE:
你们认为来年哪种投资策略和哪个地区市场的表现会优于其他？理由是什么？
区博士：中短期内，我们较偏好方向性交易和长短仓信贷产品策略。中长期而言，我们倾向于增加对危难债券（Distressed Debt）的配置。我们认为方向性交易更能捕捉在全球市场价格持续错配、技术性主导的市场以及在全球经济长时间低迷的情况下而产生的投资机会。
信贷产品方面，我们认为奉行长短仓信贷产品策略并利用明确诱因进行投机交易的基金经理，在09年上半年更能创造超额回报。由于违约高峰可能出现在2009年末或2010年，甚至更后时间，未来才是投资陷入财务困境的公司的最佳时机。我们根据每种策略审视每个地区，中短期而言，我们认为长短仓股票和信贷产品的最佳投资机会是在美国，由于美国优秀基金经理的流动资金和状况较为充裕稳定。
与以往相比，我们目前对相对价值基金的配置较少，因为相对价值基金使用杠杆，在面临压力时存在大幅下跌的风险。不过，2009年有部分相对价值基金具有很大的吸引力，尤其自2009年以来市场内价格大幅错配的领域，包括：
- 现金债券—信贷违约掉期基础
—
债券与这些债券的保险工具之间的价值差理论上应接近于零
- 对冲Delta后的可换股债券价格
—
在股票风险获对冲后，可换股债券的隐含价值应与传统债券相当
- 资本结构套利(Capital Structure Arbitrage) —
资本结构中的具有优先偿付权的资产类别相对于中间类别和权益类资产更稳健。
以上所有领域均于2008年第4季度面临巨大压力，但在2009反弹了不少，导致从事这些交易的基金取得可观回报。这些领域仍有一定的潜在价值，并可能会在年底前实现。
12. CHINA HEDGE:
你们对全球金融危机和经济衰退有何看法？你们认为危机和衰退会持续多久？你们采取什么措施加强投资组合管理及减轻全球金融危机和经济衰退对你们的影响？
区博士：我们看到，在各国政府承诺不惜一切代价维护金融体系稳定的努力下，金融体系面临的压力已有所缓解。然而，这次金融体系面临近乎崩溃而引发的全球经济衰退，尚需一段时间才能恢复。因此，未来12个月风险资产总体而言不大可能带来理想回报。这些市场仍会波动，但幅度将逐渐减小。
从对冲基金的角度来看，正如我们在前一个问题中所强调的那样，投资机会充裕，且有多方不同的途径可创造财富。就对冲基金中的基金而言，现在的重点是保持与传统资产的低相关性，尽可能控制风险，并通过一个有效多元化的投资组合抓紧这些机会。
13. CHINA HEDGE:
由于对冲基金中的基金表现不尽人意，甚至落后市场平均水平，因此许多对冲基金中的基金的经理面临巨大的赎回压力。你们对此有何评论？你们对对冲基金中的基金行业有何看法？如果监管机构加强监管力度，对于对冲基金中的基金行业来说是利是弊？
区博士：我们认为，许多对冲基金中的基金和对冲基金被赎回其实并非表现之故，而是因为投资者急需现金，因而首先赎回流动性最高的投资。全球各个投资类别其实都面临此压力，而对冲基金中的基金同样不能幸免。实力较弱或规模较小的基金将会结束，而强者实力较強者会进一步加强。
对冲基金中的基金行业管理大约一半对冲基金配置。2008年也提供了一个很好的判断哪个对冲基金是好的，哪些对冲基金不是的机会。
至于监管方面，我们整体支持监管机构对全球市场和系统性风险的监察及控制的目标。除美国只有50%对冲基金自愿进行登记外，其实许多地区的对冲基金行业已对基金经理实施高水平的监管。强制登记可能成为修改监管规则的一部分，但由于FRM所投资的优秀对冲基金公司全已进行登记，因此不会对FRM造成很大影响。我们认为监管机构已经认识到，对冲基金并非去年危机爆发的罪魁祸首，而与受严格监管的银行相比，对冲基金的杠杆运用和风险承担其实审慎很多。
14. CHINA HEDGE:
我们看到近年来许多大型对冲基金因严重亏损而遭到大量赎回，进而最终倒闭。此外，近期出现的麦道夫丑闻对对冲基金行业亦产生了恶劣影响。你们对对冲基金行业有何看法？你们认为今年会不会有更多对冲基金倒闭？就分散投资而言，这是否会影响你们的资产配置？
区博士：尽管对冲基金的资产规模从高点的20,000亿到现在的13,000亿，对冲基金行业仍然是一个比较大的行业。人们经常看到对冲基金倒闭的新闻，但是这些对冲基金只是众多对冲基金中的少数。前100名对冲基金掌握业内管理资产总额的70%。
对冲基金的业务模式我们认为是具有生命力的。回顾08年下半年，对冲基金遭到赎回，并且还被主要经纪商追索信贷。我们估计对冲基金因此被迫在短短几个月内出售账面总值约70%的资产对冲基金被迫在流动性欠佳的市场上出售资产，但大部分大、中型对冲基金却能够生存下来，从某种角度来说很了不起。相比较而言，很多大银行都到了需要政府出手救助的地步，这也从另外一个角度说明对冲基金在此轮金融危机中的表现比一些大银行要好。
如果所有赎回落实，对冲基金行业的管理资产可能由2008年中的高位约两万亿美元缩减至约一万亿美元。这看来规模已严重缩小，但只不过是退回到行业2005年的规模而已，对冲基金行业仍可保持健康和活力。
我们对长期前景非常乐观。长期以来，对冲基金行业较几乎所有其他风险资产类别创造更高的风险调整后回报。我们认为，对冲基金还会表现出它持续吸引投资者的魅力。
15. CHINA HEDGE:
到目前为止，仅有荷兰银行与Permal推出的一只基金中的基金在中国拥有全面委托投资，而大多数QDII基金公司只是将资产配置于股票、固定收益或共同基金等传统资产类别。亚洲其他新兴市场是否也是一样的情况？你们对于对冲基金行业和对冲基金中的基金行业在新兴市场，包括中国内地的发展有何看法？
区博士：在我们的印象中，中国内地的监管机构还处于摸索不同的资产类别，在不断探索学习对冲基金的投资策略的过程中。怎么取长补短并发挥对冲基金得天独厚的优势成了当前中国内地监管机构的努力方向。不仅仅是中国，所有国家都是在摸索的过程中，FRM非常乐意为促进人们对这一行业加深了解以尽绵薄之力。
22.5.2009
郑伟伟执笔
被访问嘉宾简历：
|
|
FRM Hong Kong Limited
首席投资官区景麟博士，荣誉勋章
区博士于2008年9月加盟金融风险管理集团(Financial Risk Management Group)，担任FRM香港办事处行政总裁，负责FRM集团在亚洲地区（日本及韩国除外）的全球对冲基金的基金业务。之前，区博士曾在汇丰环球投资管理有限公司、GMO及霸菱资产管理出任高级管理职务。
区博士身兼多个公众委员会和审裁处的成员，曾于2006至2008年担任香港证券专业学会主席及在2004年担任香港投资基金公会主席。区博士于2008年7月获香港特区政府颁授荣誉勋章，以表扬其对证券及资产管理界的卓越贡献。
区博士拥有牛津大学物理学学士及杜伦大学(Durham |
|
University)粒子理论物理学博士学位。区博士为特许财务分析师和香港证券专业学会的资深会员。 |
如果您想了解更多的对冲基金经理采访报告，请参考我们的对冲基金快报。如果您对对冲基金采访报告有任何疑问，请联系郑伟伟yolanda.zheng@chinahedge.com.cn
1. CHINA HEDGE: What is the background and history of your company? What’s your company’s investment philosophy and investment style?
Dr. Au King-lun, MH,
CEO of FRM Hong Kong Limited: FRM was founded in 1991 by Blaine Tomlinson as a London-based private family office and hedge fund research consultancy. Today we are one of the largest independent Fund of Hedge Fund groups, and we have a significant presence in Asia with offices in Japan, Hong Kong, Korea and Australia.
Blaine’s initial interest in hedge funds was sparked after 20 years concentrating on derivatives for Citi, Nomura and AIG. After he left AIG he decided to invest some of his own money and chose two managers: a prestigious traditional manager; and a hedge fund.
In the early 1990s, most people thought hedge funds were very risky investments, but traditional managers were safe. In the first performance review the traditional manager had made a loss but was happy, having outperformed the stock index. By contrast, the hedge fund had made money, but apologised, believing he should have made more in that environment.
This experience completely reversed Blaine’s perception of risk associated with hedge funds and traditional vehicles, which encouraged him to build a firm to study the hedge fund industry and to pursue potential investment opportunities.
FRM believes that hedge funds are a more compelling form of asset management. Risk means tracking error for traditional managers, whilst it means loss for hedge fund managers. Hedge funds focus on capturing the upside with limited downside risk, which usually results in better return/risk characteristics from a long-term perspective.
Our investment philosophy is built upon our understanding of the risk/return characteristics of hedge funds versus traditional vehicles. One of our beliefs, which has been tested by history, is that hedge funds are more flexible and can use a wider array of investment strategies to generate absolute returns. However, individual hedge funds can have high volatility and contain risks. That is the advantage of a FoHF approach. A good FoHF can blend a diverse array of strategies in order to deliver more consistent returns and minimize the risks.
In terms of our investment approach, we seek to identify and invest in the best hedge fund managers who have the ability to generate consistent returns with limited downside risk. Risk-management is something which is as important as portfolio management, since risk management can contribute to long term returns through limiting periods of loss. We also diversify our exposure to strategy level to limit correlation, which can result in less volatility and better risk-adjusted returns.
2. CHINA HEDGE: What is your investment universe? In which countries does your portfolio invest? What’s your investment process?
King:
We do not constrain ourselves to any subset of strategies. We pursue opportunities across a broad range of strategies globally, although we do not invest in all of them at the same time. Our allocation to specific strategies depends on our understanding of the strategies and how we translate our view into asset allocation.
The investment process is as follows:
- Our manager research analysts conduct due diligence on all hedge funds in their area of speciality. This often begins by using proprietary quantitative screening tools on our extensive database of over 10,000 hedge fund managers, analysing for risk, return and correlation characteristics of funds from both absolute and relative value perspective.
- This is supported by qualitative analysis of managers through face-to-face meetings, capital introduction conferences and industry research. This is highly labour-intensive with over 400 new managers
meeting each year, including 1,000 due diligence meetings and over 4,000 interactions with managers annually.
- Better managers will be subject to further analysis and due diligence, usually in the form of meeting members of the team, conducting more detailed analysis of how the fund generates returns, and what differentiates the fund from its peers.
- If the analyst feels strongly that this is a best of breed manager, it is formally assessed by both the investment risk team and the operational risk team. This process again takes place via a series of meetings with the manager and analysis of data. The risk management teams have an absolute veto on investment, and can prevent funds continuing through the investment process at this stage.
- Assuming the risk teams have not exercised their veto, the analyst will then present the fund to the most senior members of the investment team. If consensus is agreed, then the fund is added to our ‘Investment Pool’, effectively a buy-list of hedge funds. There are currently only around 100 funds from the global universe of many thousands that have been deemed good enough for entry into the investment pool.
- Our portfolio management team then constructs portfolios from the managers in the investment pool, in order to meet their mandates. The portfolio management team have a variety of bespoke optimisation tools at their disposal to ensure the most efficient allocation of capital.
- While a fund remains in the Investment Pool, the manager research analysts and risk teams conduct regular monitoring of the fund to ensure that the investment style of the fund is consistent and there’s no breach of risks.
3. CHINA HEDGE: What is the strength and weakness of
FoHFs in comparison with single hedge funds? What’s your comment on the double-charged fee structure in
FoHFs?
King:
FoHFs and hedge funds are very different things. A return stream from a single hedge fund can have high risk and exposure to a specific market factor, however, a well diversified FoHF portfolio can have low risk and limit exposure to market factors. It combines a number of complementary hedge fund styles and managers to deliver specific types of return streams. FoHF fees do not represent a double layer – rather it is a fee for a valuable service. FoHFs deliver returns that can be customised and that are quite different from single managers.
To invest in hedge funds properly takes resources. The hedge fund industry is vastly different from traditional managers in its complexity and diversity. A high level of skill is required to analyze the varied trading techniques of hedge funds, which means specialists with trading and investment experience are needed. And to better monitor hedge fund managers and determine if there are breaches in terms of risk guidelines or other operational issues, good investment infrastructure is essential too. Our fees are justified by the expertise we provide in strategy analysis and operational due diligence.
The alternative to achieve a risk/return objective similar to FoHF is to conduct a similar level of due diligence in-house, which usually lead to substantially greater costs than employing a fund of hedge funds manager for the majorities but some of the largest institutional investors.
4. CHINA HEDGE: What are the risk/return objectives of your funds? Which kind of investor is suitable for your products?
King:
FRM offers all-weather and strategy-specific portfolios, which can be suited for both institutional and individual investors. We have a specific product line designed for private wealth channels, and in addition we have a hedge fund seeding business called FRM Capital Advisors that offers access to new managers.
Our products can be classified as:
- Multi-strategy products, which aim to deliver consistent returns over cash with low volatility and near-zero correlation to traditional asset classes over a market cycle. These portfolios invest in a broad range of underlying hedge funds and strategies.
- Equity Long-Short sector portfolios, which aim to outperform equity benchmarks by participating in rising equity markets and limiting exposure during falling markets, through investing in managers who demonstrate excellent stock picking and risk management capabilities.
- Credit sector portfolios, which invest in managers who apply fundamental research skills to credit markets and seek to produce returns throughout a credit cycle, not just in rising markets.
- Directional trading sector portfolios, which act as good diversifiers and have historically performed well during periods of high market volatility, when traditional assets perform poorly as clearly demonstrated in 2008. In this area, our portfolio of CTAs won the “Best Managed Futures Fund” award from InvestHedge in March 2009.
We also provide customized portfolios for large institutional clients.
All of our portfolios are designed for specific client needs. For example, combining our multi-strategy and trading programs produce return streams that cater to high net worth clients’ needs.
5. CHINA HEDGE: What are your criteria to pick a hedge fund manager in your portfolio? What are your criteria to remove a manager from your portfolio and if your criteria have ever been triggered?
King: What we look for in a manager is a repeatable investment process, an investment edge or skills that allow them to deliver alpha consistently over a long time period. We look at five key areas: people; organisation; asset selection; portfolio construction; and risk management capabilities.
It is a very rigorous process involving a significant amount of due diligence. Out of the thousands of hedge funds we analyze, we only invest in about 100 currently.
We think that a ‘sell discipline’ is very important. We do redeem from managers on a regular basis for a number of reasons:
- we no longer have conviction in the manager’s investment edge;
- we believe the manager is taking excessive risks;
- breaches in investment or risk guidelines;
- refusal to provide sufficient transparency;
- key man leaves;
- the opportunity set for that strategy isn’t good in the current environment.
All of these criteria have led to redemptions over the past ten years, some of which are used quite frequently.
6. CHINA HEDGE: Top-down asset allocation between different strategies is an essential element for FoHFs. What’s your research methodology in determining your investment themes according to different market conditions? Which factors trigger your shift from one strategy to another?
King: We handle top-down allocation through two different stages. First is our strategy allocation process, in which our analysts predict expected returns for every hedge fund in our portfolio under three main economic scenarios: risk seeking, risk averse, stable. The predicted returns are derived from a combination of discussions with hedge funds as well as strategic analysis. This is a bottom up process which is important in determining where we have conviction in managers and strategies. From a top-down perspective our top investment staff analyzes macro themes and variables and look at how our portfolios would respond to those. These issues are then discussed in-depth at a meeting attended by all investment staff. Our CIO and other senior investment staff make final decisions on allocation targets.
More frequently, our Investment Executives (our senior investment team) look at our allocations on an ongoing basis and make adjustments based on market conditions.
Factors which trigger a shift from one strategy to another vary but always depend on the environmental outlook. For example, the difficulties in financing in hedge fund industry became a big concern after the carnage seen in Feb 2008. We realized that those over-levered hedge funds should be very vulnerable to stresses whenever they need liquidity. Consequently we proactively redeemed our allocation from those who rely too heavily on leverage, taking relative value strategy for instance, which has been proved to be right at today’s view point.
7. CHINA HEDGE: What differentiates your company and your funds from other peers?
John:
Our competitive edge lies in our:
Experience - the strength and depth of experience among FRM’s key investment personnel is a tangible competitive advantage, as is our 10+ years experience in managing fund of fund portfolios for institutional clients.
Rigorous processes for all the investment decisions - manager selection, portfolio construction, risk management and monitoring, including a highly respected, independent Operational Due Diligence team.
Independence – FRM has no marketing agreements, dealing relationships or commission arrangements with underlying hedge funds. When we select a fund, there is no conflicting interest. Equally, FRM is owned by its founders, and has no reporting lines to a larger parent body. Our sole focus is on funds of hedge funds.
Performance – despite the difficulties in 2008, our 10 year track record of generating positive risk adjusted returns with a low beta to traditional markets sets us apart.
Recognition – our asset base is dominated by many large, blue-chip institutions (insurance companies, pension funds, banks and asset management companies) and we have several key customized mandates for such clients where we are their sole provider of hedge fund products.
Robust business - we have a healthy balance sheet, a substantial infrastructure, and a stable core client base, which helps us get through this tough market turmoil and should help to regain our competitiveness once the turmoil is over.
Global nature – we are one of those FoHFs who have big presence in Asia since the establishment of our Asian office in 2000. On one hand we do believe emerging Asian’s stories; on the other hand, we think that this global approach can bring our firm an advantage over others who tend to concentrate on one region.
8. CHINA HEDGE: In such a volatile market, risk management is extremely important for fund managers. How do you control the risk of your fund to make sure it’s within your risk guidelines?
King: FRM believes that risk management is the cornerstone to hedge fund investing, which is implied in our company’s name. Our research analysts strictly follow our philosophy and focus on selecting those managers who manage risk well. We also have an independent risk group that is authorized the right to remove funds or reduce positions. There is ongoing monitoring and analysis that covers three key areas: operational risk; trading risk; and liquidity and financing risk.
The output of monitoring these risk management processes, along with analysis of the underlying managers’ performance, is subject to the ‘exceptions reporting’ process. In this process, systematic analysis highlights when underlying managers have risk exposures that are not aligned with their mandate, or when performance deviates from ‘expected’ levels, based on peer group and historical analysis.
FRM uses a number of systems, which range from straightforward applications, such as liquidity analysis, leverage monitoring, sector allocation vs suggested target allocation and cluster analysis, to state-of-the-art risk management tools which help us construct, monitor and stress test our portfolios.
In terms of operational risk, we have an independent business risk group that conducts a full analysis as well as regular reviews of each fund in the portfolio. They have independent veto power to remove any fund they are not comfortable with. Business risk, operational risk, people risk, fraud risks and regulatory risks are what they concentrate on. This is an intensive process involving direct meetings with fund managers, discussions with service providers, and a desk based review of documentation. While a key focus is fraud avoidance, our process is comprehensive and seeks to identify any potential weaknesses in a hedge fund’s operational structure.
9. CHINA HEDGE: There are criticisms that the information between hedge fund and fund of hedge fund is asymmetric. For example, Madoff claimed himself as CTA manager and they never disclosed their trading models to investors since they are confidential. Not just Madoff, other outstanding CTA or Quant managers seldom disclose their strategies to investors as well. How do you solve this asymmetric information problem? As a fund of hedge fund manager, to understand the managers’ strategies and risks is the key. How do you structure your team to better understand different strategies and their related risks?
King: We do not invest in any manager unless we have received sufficient transparency as to be fully comfortable with the investment process and the integrity of the back office operations.
Understanding a strategy comes in two ways. Firstly we hire former traders and investment staff from hedge funds and investment banks, so that we have staff who have traded the same strategies that managers trade. Secondly we require sufficient transparency to understand a strategy - the approach on securities selection, the types of instruments that used, and the risk levels. We use these information to verify whether the strategy and the fund performance are consistent. Full position transparency is not always necessary, but a thorough understanding of the process how the fund makes money is always necessary. We also employ a dedicated team who conduct operational due diligence to identify whether the operational environment could allow a fraud to occur.
10. CHINA HEDGE: Have you ever allocated your portfolio into Chinese hedge fund managers? How’s your view on Greater China managers? What’s their strength and weakness in general? In which aspects do you think they can further improve? Will you have more or less exposure to greater china managers in the year ahead? Why?
King: FRM has allocated to China-focused hedge funds in the past and we continue to have indirect exposure through regional allocation. Sharing the fast growth of the Chinese economy as well as easing volatilities is the main objective for us to invest in Greater China managers.
Our experience on Greater China managers are that they are good at on the ground research and at understanding the influence of macro factors on the markets. However, risk management and the consciousness of capital preservation is always the weakness for the majority of the Greater China managers, which can be depicted by their big downside volatility and their performance in 2008.
After the experience of the credit crunch, we hope to see managers implement more stringent risk controls. And we do welcome the Chinese authorities introduce more hedging instruments such as index futures, index options which can help to manage risks better. We are currently evaluating a number of promising Greater China managers as this region is likely to lead the recovery given China's relative economic strength. The timing is still unclear yet. At this moment we are focusing on their ability to preserve capital should this crisis be more protracted than anticipated.
11. CHINA HEDGE: What kind of strategies and which geographical markets do you expect that could outperform in the year ahead? Why?
King:
In the near to mid term, we favour Directional Traders and Credit Long-Short. In the mid to long term, we intend to allocate more to Distressed Debt. We believe that Directional Traders have the ability to capitalize on opportunities arising from continued global dislocation, technical markets, and a prolonged recessionary world.
In the Credit space, we feel that Credit Long-Short managers who opportunistically trade situations with clear catalysts are in a better position to generate alpha in 1H09. The best time for investors in distressed companies remains in the future, since the peak of the default cycle is likely to be in late 2009, 2010 or even later. We look at geographic regions within the context of each strategy, however, we expect the best opportunities in both Equity Long-Short and Credit to lie in the US in the short to mid term due to greater liquidity and stability of quality managers.
We currently have smaller allocation to Relative Value managers than usual, due to their use of leverage and inherent risks of large drawdown in stressed period. However, some areas of relative value are very attractive in 2009, particularly where there are large intra-market dislocations from 2009. These include:
- Cash bonds-CDS basis – the difference in value between bonds and insurance instruments on those bonds, which should theoretically be close to zero
- Delta-hedged convertible bond prices – the implicit value of a convertible bond after the equity exposure is hedged, which should behave like a traditional bond
- Capital structure arbitrage – senior tranches along the capital structure should reflect their seniority in comparison with lower end tranches such as mezzanine and equity tranches.
All of these strategies were experiencing substantial stress in Q4 2008 who have recovered a bit in 2009. We believe these opportunities still have some embedded value, which may be realized before the end of the year.
12. CHINA HEDGE: How’s your view on the global financial crisis and economy recession? How long do you expect it will last? How do you position yourself to better manage your portfolio and mitigate the suffering from the global financial crisis and economy recession?
King: We see financial system stress receding in response to sovereign commitments to stabilise the system at all costs. However, the global recession caused by the near-failure of the financial system takes time to be pulled through. As a result, there is high probability that risk assets, in aggregate, won’t deliver satisfactory returns for the next 12 months. These markets will remain volatile; however, we’ll see a process of suppression of volatility.
From a hedge fund perspective, as we highlighted in the previous question, the opportunity set is rich and there are a number of ways that managers can make money. Important factors now for fund of hedge funds managers are to keep correlations to traditional assets low, manage risks as well as possible, and capitalize on these opportunities through a well-diversified portfolio.
13. CHINA HEDGE: Many FOHF managers are facing huge redemption due to their unsatisfactory performance, even lagging the market average. How are your comments on this? How’s your perspective on FoHF industry? If a tighter regulation is imposed, do you think the FoHF industry will be better-off or worse-off?
King: We think that many FoHFs and hedge funds were hit with redemptions not only because of their performance, but also because of investors’ need for cash whilst FoHFs usually provide good liquidity. We saw this pressure across different investment vehicles globally, not just FoHFs. The consequence of this revolution should be that the strongers survive and the weakers die.
The FoHF industry manages about half of the hedge fund allocations. The crisis in 2008 offers a perfect opportunity to distinguish which manager is good and which is not.
In terms of regulation, we are generally supportive of regulators’ goals to monitor and control systemic risk globally. Much of the hedge fund industry is already regulated at the manager level, with the exception of the US, where only 50% of hedge funds have registered on a voluntary basis. Registration is likely to become compulsory as part of the regulatory overhaul but as most of the top hedge funds that we invests with have already registered this should not have a large impact on us. I think regulators recognize that hedge funds were not the cause of the difficulties last year, and the risks and leverage that hedge funds taken were much more conservative than the so-called highly regulated banks.
14. CHINA HEDGE: We’ve seen a number of giant hedge funds shut down due to big losses which triggered huge redemption thereafter in recent years. And the hedge fund industry has badly affected by the Madoff scandal as well. How’s your view on hedge fund industry? Do you expect more hedge fund will shut down this year? Will that affect your asset allocation in terms of diversification?
King: Even though hedge fund assets decreased from the peak of almost 2 trillion to current 1.3 trillion, the industry is still large. Most of those who hit the headlines on their closure only account for a small amount of the industry AUM. The top 100 hedge funds account for 70% of the total industry AUM.
Despite the closure of some small hedge funds, the business model of hedge fund, especially the risk management practices, has been proved to be robust in 2008 in which hedge funds suffered from redemptions and squeeze of liquidity from their prime brokers due to their risk management guidelines. It’s estimated that hedge funds were forced to sell about 70% of their total books in a matter of months. The fact that hedge funds make through the financial distress during an illiquid market, with the vast majority of large and mid-sized funds surviving, is somewhat remarkable in comparison with the huge bail-out required by those big banks.
The industry’s AUM will probably go from a high of around $2 trillion in mid-2008, to around $1 trillion when all redemptions work through. This seems like a significant drop, but it will only take us back to the industry’s size in 2005 – so we will still have a healthy and vibrant industry.
Over the long term we are very optimistic. The hedge fund industry has produced better risk adjusted returns than almost every other risk assets over the long term and we are confident that it will keep its path to be attractive for investors.
15. CHINA HEDGE: There’s only one FoF that has global mandate in China by now, which was launched by ABN Amro and Permal. And the majorities of QDII managers only allocate their assets into traditional asset classes such as equities, fixed income or mutual funds. Is that the case in other emerging markets in Asia? How’s your perspective on the development of hedge fund industry and fund of hedge fund industry in emerging markets including mainland china?
King: Our impression is that the Mainland Chinese regulators are keen to educate themselves further to understand different asset classes and to enjoy the undoubted advantages hedge funds offer while avoiding the pitfalls. It is a process of education in all countries, not just in China, and FRM is very keen to help promote better understanding.
22.5.2009 by Yolanda Zheng
Profile of Interviewee
Profile of Dr. Au King-lun, MH:
|
|
Dr. Au King-lun, MH, CEO of
FRM Hong Kong Limited
Dr. Au joined the Financial Risk Management Group as CEO of FRM Hong Kong in September 2008. He is responsible for the FRM Group's fund of global hedge funds business in Asia ex Japan and Korea. Previously, Dr. Au held senior management positions at HSBC Global Asset Management, GMO and Baring Asset Management.
He serves on a number of public committees and tribunals. He was Chairman of the HK Securities Institute from 2006 to 2008 and Chairman of HK Investment Funds Association in 2004. |
|
In July 2008, Dr. Au was awarded the Medal of Honour (MH) by the HK SAR Government for his valuable contributions to the securities and asset management industry.
He holds a BA in Physics from Oxford University and a PhD in Theoretical Particle Physics from Durham University. He is also a Chartered Financial Analyst and a Fellow of the HK Securities Institute. |
Please check out CHINA HEDGE
Weekly for more
exclusive hedge
fund manager interviews. If you
have any other questions with
regards to the interview reports,
please contact Yolanda Zheng,
yolanda.zheng@chinahedge.com.cn
for more information.
|
