(Bloomberg) -- BlackRock, Macquarie Group and Millennium Capital Management former employees are planning a Hong Kong-based hedge fund which will use computer models to spot trading opportunities in 13 Asian stock markets.
Zentific Investment Management, led by Chief Investment Officer Christopher Lee, will start the market-neutral fund early next year, said HS Group, a Hong Kong-based provider of long-term capital to newer hedge funds, which will be one of its first investors, in an e-mailed statement. The other investors are Zentific partners and unidentified institutions, according to the statement.
Lee, who headed BlackRock’s scientific active equity department in Hong Kong, will be joined by head of research Burke Lau, who led Asia and Japan quantitative research at Macquarie Securities. Michael Friedlander, Zentific’s chief operating officer, used to work for billionaire investor Israel Englander’s hedge-fund firm Millennium, heading a regional team whose responsibilities included risk, operations and technology matters, according to the statement.
Asia’s hedge fund industry was until recently dominated by long-biased funds, which rely on market rallies for returns and can’t generate profits in downturns. Funds that use computer models to process large volumes of information and promise to make money in both market conditions are rare in the region.
“The reason investors like this strategy is because Asia’s markets are so diverse, it’s hard to cover them all comprehensively,” said Michael Garrow, HS Group’s chief investment officer. “The high participation of retail investors makes for more inefficiencies and more potential to generate alpha.” Alpha refers to gains above market benchmarks.
There are nearly 8,000 stocks with an individual market value of more than $200 million listed on Asia-Pacific region exchanges, according to data compiled by Bloomberg.
Zentific employs a similar strategy to Sensato Capital Management, the San Francisco-based manager of an Asia-focused quant fund that use computer models to generate trading signals based on analyses of company fundamentals, valuations and investor sentiment.
Sensato opened its fund to investors in June 2010 and received $50 million of backing from FRM Capital Advisors the same year. It has since boosted assets to $1.75 billion and returned more than 13% in 2014 through earlier this month, according to an investor update.
Lee was on the Barclays Global Investors active equity strategies team that Sensato founders Ernest Chow and Jonathan Howe once co-headed, said Garrow. BlackRock bought Barclays Global Investors in December 2009.
Lee served on the investment board of BlackRock’s Pan Asia Opportunities Fund, said the statement. His license with the world’s biggest money manager expired in October, according to information posted on the website of Hong Kong’s Securities and Futures Commission.
The Macquarie Asian Alpha Fund, which uses quantitative analyses to screen stocks, has returned an annualized 10 percent between inception in October 2005 and November this year, beating the MSCI Asia Pacific Index’s 2.2% annualized gain over the same period, according to its monthly newsletter. It managed about $2 billion at the end of November.
Zentific is HS Group’s second seeding deal, in which investors provide capital to new hedge funds in exchange for a share of their fee revenues. The other was Pleiad Asia Fund, led by two Soros Fund Management Asia specialists, which has tripled assets to more than $440 million over the last three months, according to the statement.