Best Boutique Asset Manager - Hong Kong
Company: AD Capital Management
(Hong Kong) Limited
Address: Level 10 Central Building,
1-3 Pedder Street
Central, Hong Kong
Phone: +852 3958 2861
Established in 2004, AD Capital Management (Hong Kong) Limited, formerly known as Apex Capital Management (Hong Kong) Limited, is dedicated to utilising their strong performance history for the benefit of their investors.
The firm was founded by Tat AuYeung, a veteran fund manager with over 25 years of experience in the equity investment industry. In 2012, the firm was restructured, and both the firm and their flagship fund were rebranded as AD, which means anno domini; rich and abundant. The fund’s primary aim is to provide investors with returns which reflect this translation.
Since 2013 the investment team has been led by portfolio manager Benjamin Cheng, in close partnership with the firm’s senior trader Gloria Kwok. Benjamin and Gloria have been with the firm for seven and nine years respectively, and as such, together with Tat, they draw on their wealth of experience to help them make the best decisions for their investors.
Tat explains the firm’s overall aims and gives us an overview of the company’s flagship fund.
“It is our aim to provide investors with access to the China equity market via our low-volatility fund, which comes with capital protection. The firm’s flagship fund, AD Greater China Alpha Fund (formerly known as Apex Greater China Directional Fund), was launched in 2005.
“The fund’s core investment strategy is long/short equity trading, capitalizing on the inefficiencies presented by fundamental, tactical and event-driven catalysts. In light of macro environment developments, directional strategy may be used as well. A proprietary risk management system and dynamic exposure management are widely used across all categories to further enhance returns, as well as to mitigate the high volatility inherent in China equity market. Cross-border trading is employed as part of the strategy, and as a means to hedge. In addition the fund may also be hedged with local and non-local derivatives.” To enhance the scalability of their investment strategies, Tat points out that they have been investing mainly in mid- and large-cap stocks with ample trading liquidity.
Since moving onto the international financial stage in approximately 1997, the Chinese market has been characterized by boom/bust cycles and wide vacillations in investor sentiment. Benjamin explains how the fund works around this fluctuating market to provide strong returns for investors.
“The fund is designed to minimize volatility despite investing in markets known for their high volatility. To achieve this, exposure is dynamically adjusted to enhance returns during high-conviction scenarios and to minimize losses during adverse market conditions.
“Using our strong industry knowledge, we identify business drivers across different industries and then employ a proprietary systematic approach, to search for fundamental catalysts that may potentially alter those business drivers, we thus buy and short-sell shares to capitalize on the mispricing of securities.
Benjamin adds that the firm encounters both tactical and event-driven catalysts when investing in such an evolving market, but that they have a number of strategies to help them deal with these effectively and for the benefit of their investors.
“Since our inception we have seen inefficiencies arise from time to time in Greater China securities market, mostly due to various technical constraints. Those inefficiencies demonstrate repetitive patterns. Therefore the success of our strategy hinges on the identification of such constraints and the resulting repetitive patterns, as well as back-testing.
“Additionally, drawing on our established networks with various brokers, we participate in short-term opportunistic investments arising from events because we understand the market dynamics.
On reflection the past year has been particularly positive for the firm. The biggest challenge the fund faced in 2015 was the huge volatilities caused by uncertainty of government policies. However, this was also the biggest source of profits. They attribute this to the consistently good entry points of trades alongside a robust proprietary risk management system.
Moving forward the firm will continue to navigate the increasingly volatile Chinese markets and continue to offer high returns with minimal risk for their investors.