Wednesday

March 15, 2017

  March 15, 2017

Ex-Kima Capital's Klintberg Joins Merchant GroupBy Suzy WaiteJustin Klintberg, the former Marble Bar Asset Management manager who started Kima Capital Management, joined Merchant Group in February to head up its new advisory business.

Klintberg is CEO of Merchant Corporate Advisory, a subsidiary of Perth-based Merchant Group that opened last month, he said in a telephone call on March 14. He is on the investment committee for the firm's funds and will eventually take on a more active role in the day-to-date management of the Merchant Opportunities Fund, a long-only strategy focused on Australian equities, he said.

Klintberg is currently working in Hong Kong but will relocate to Melbourne by the end of the year.

Merchant Opportunities Fund is managed under Merchant Fund Management, another subsidiary of Merchant Group. The fund gained 89 percent last year, largely benefiting from its long investments in medical marijuana companies Zelda Therapeutics Ltd, AusCann Group Holdings, MMJ PhytoTech and MGC Pharmaceuticals Ltd, said Merchant Group's CEO Andrew Chapman. Merchant Opportunities Fund is also a cornerstone investor in CannPal, another medical marijuana company it expects will either "IPO or reverse takeover in the next couple of months," Chapman said. The fund's bullish bets on cobalt also helped returns, as the metal — used for producing batteries in electric cars —experienced a 141 percent rise after reaching a seven-year low on Feb. 1, 2016.

Merchant Opportunities Fund has A$50 million (about $38 million) in assets and is up 32 percent for the first two months of 2017.

Merchant Fund Management aims to roll out a resources-focused fund in July which will invest in equities and commodities, Chapman said.

Other bets that have paid off include investments in lithium companies Kidman Resources and Birimian Ltd; satellite company Sky and Space Global Ltd; biotechnology firm PolyNovo Ltd and gold miner Pantoro Ltd., Chapman said.

Klintberg started the Kima Pan Asian Long-Short Equity Fund in July 2009 in Melbourne, which traded stocks affected by events such as rights issues, spinoffs, mergers and acquisitions. The fund started trading with A$8 million and grew to $40 million by October 2010, Bloomberg News reported at the time. Assets peaked at $100 million in 2011, he said.

Klintberg moved to Hong Kong in January 2011 and continued to manage Kima Capital's fund with money from small funds of hedge funds, family offices and pensions until January 2015, when it returned all outside capital and solely managed money from Sun Hung Kai & Company, a Hong Kong-listed investment holding company, Klintberg said. Sun Hung Kai & Co purchased a 33 percent stake in Kima Capital Management at the end of 2013, he said. The Kima Pan Asian Long-Short Equity Fund is still being run with Sun Hung Kai & Co's money, he said.

Sun Hung Kai did not have an immediate response.Before starting Kima Capital Management, Klintberg managed arbitrage and special

situations investments for Marble Bar Asset Management in London from 2001 to 2005 and Melbourne from 2005 to 2008.

Chapman founded Merchant Group in Dec. 2011. He previously worked at Entrust Private Wealth Management.

Quote of the Week

"If you want to think of 'Days of Our Lives,' it's pretty similar."

— Seth Fischer, Oasis Management, on

Yingde Gases Group Co.'s management

battle ( )see story

Inside

Returns In BriefFebruary returns were mostly positive. Asia-focused funds that did lose money kept the losses to less than 1 percent.

ChinaPine River Capital delays a fund spinoff until June after a large investor decides to pull its money.

Market CallsKIS Capital is bullish on cobalt prices and bearish on shares of Caltex Australia as it predicts disruptions from electric vehicles and self-driving cars.

SpotlightSeth Fischer, chief investment officer of Oasis Management, on Nintendo's new console, the PanaHome deal, Yingde and activism in Japan.

Korea

Lime Asset Management Co. is taking up activism in South Korea, betting the country's family-owned conglomerates will have to deploy their cash hoards. The $500 million Seoul-based firm started its first activist fund in November.Full story online.

Returns in Brief

Justin Klintberg

Andrew Chapman

  Hedge Funds Asia 2  March 15, 2017

 

 

Returns in Brief

A look at Asia-focused hedge fund performance last month. Funds in the table below that are not mentioned in the accompanying text were reported in past issues of the Brief or in Bloomberg News stories, which may be accessed on the terminal.

Greenwoods Asset Management's $1.4 billion Golden China Fund returned 4.9 percent in February and 5.6 percent in the first two months, according to estimates sent to investors seen by Bloomberg News, as Chinese shares listed domestically, in Hong Kong and in the U.S. gained.

— Bei Hu

APS Asset Management, the Singapore-based investment management firm, gained 3 percent in February in its $1.9 billion APS China A-Share Fund, bringing year-to-date returns to 2.3 percent, according to an investor update. The firm's $79 million Greater China Long-Short Fund rose 0.9 percent in February and is down 2.7 percent so far this year, while its $550 million Asia Pacific Long-Short Fund gained 1.5 percent last month and is down 1.5 percent so far this year.

Astral Asset Management's Asian long-biased fund gained 1.7 percent in February and is up 4.9 percent for the first two months of 2017, according to an investor update. It has gained 5.4 percent since it started trading in May 2015. One of the fund's investments in Auric Pacific Group helped performance in February as the Singapore-based company received a take-private bid. "The price offered was below what we believed was fair value. Unfortunately, as a minority owner, we are essentially powerless to fight for a better price." the letter said. "On the bright side, the privatization was one of the many that took place throughout the month and triggered market participants to speculate which companies will be the next ones to be privatized." Other positive contributors included Hop Hing Group, the operator of Dairy Queen in Northern China and Best World International, which distributes health and lifestyle products, Sean Mah, portfolio manager, said in an email on March 14. Mah manages the fund along with Lee Kian Soon.

—Suzy Waite and Klaus Wille 

China

February Returns

Year-to-Date

  Hedge Funds Asia 3  March 15, 2017

China

Pine River Said to Delay China Fund Spinoff Amid Redemption  By Bei HuPine River Capital Management has delayed a proposed spinoff of its more than $800 million China-focused multistrategy hedge fund until June after a large investor decided to pull its money, said people with knowledge of the matter.

Pine River had previously planned to let Hong Kong-based Dan Li, who leads the fund, set up his own firm in March and take a minority stake in it, said the people, who asked not to be identified because the information is private. Li’s Pine River China Fund, which trades stocks, convertible bonds and credit, lost almost 12 percent in 2016 in its first annual loss, said one of the people.

The people didn’t identify the investor who redeemed from the fund. Patrick Clifford, a New York-based spokesman for Pine River, which oversees about $10 billion of assets, declined to comment.

Despite last year’s loss, the Pine River China Fund made an annualized 11 percent for investors between inception in early October 2013 and the end of last year, one of the people said. Thatcompares with the 6.3 percent yearly gain for the Eurekahedge Greater China Hedge Fund Index in the same period. The gauge fell 4.8 percent in 2016.

Pine River, based in Minnetonka, Minnesota, hired Li in 2012 from rival Magnetar Capital Partners. Li’s multi-asset approach in China is somewhat unusual in Asia, where managers focused on China tend to invest in stocks.

A filing with Hong Kong’s Companies Registry shows that Li incorporated a firm called Starkhorn Asset Management (HK) in August 2016. Li was a managing director at Magnetar between 2005 and 2011, heading its China business and financial engineering group. He was a director at Citadel LLC before Magnetar.

Pine River China Fund, which opened with about $100 million, saw assets peak at $1.3 billion between March and April last year. Assets have declined by more than a third since then.

Pine River, whose mortgage bond bets after the global financial crisis helped funds under management surge, has seen staff departures and fund closures of late. Chief Executive Officer Brian Taylor announced to investors in June

Magnetar Alumnus

Bond Bets

2016 that it was shutting an eight-year-old, $1.6 billion fixed-income hedge fund after Steve Kuhn, one of its co-managers, said he was stepping away from managing money. At the time, the firm also disclosed plans to spin off the China fund.

In the second half of 2015, Pine River cut a Hong Kong-based team that tradedemerging-markets currencies and shuttered the 12-year-old Pine River Asia Fund, a multistrategy hedge fund focused on convertible bond arbitrage that had managed about $120 million.

Kuhn, who joined Pine River in 2008, was known for his China connections. He was sent by his former employer Goldman Sachs Group Inc. to China in 2005 to educate employees of sovereign-wealth funds and the central bank on the U.S. mortgage market. He also taught finance at Tsinghua and Peking Universities during his stay in the country.

Pine River opened a Beijing office in 2010. In 2013, when it was starting the China fund, it employed about 70 people in Beijing, Shenzhen and Hong Kong, one of the few global hedge funds with a large presence in China, a person with knowledge of the matter said then.

 

Market Calls

  Hedge Funds Asia 4  March 15, 2017

 

Market Calls

KIS Capital Likes Cobalt, Shorts Caltex on Electric Vehicle Use  KIS Capital Partners, a Sydney-based hedge fund, predicts cobalt prices will climb as Caltex Australia Ltd. shares decline from an increase in electric vehicles and self-driving cars.

The fund is short shares of Caltex Australia in its A$136 million ($103 million) long-short equity hedge fund, according to Josh Best, chief investment officer, as it expects gas stations to lose business as a result of this trend.

Improved fuel efficiency will likely result in decreasing volume for petrol stations, Best said. Electric vehicles have not yet had an impact on Caltex's earnings, but it "will at some point in the next few years," he said.

Caltex has "signed a couple of deals with food retailers to attract people and give their petrol stations a destination other than fuel," he said on a telephone call on March 10. "But we'll have to see how that works. If you're not going to stop for fuel, do you still need to stop to get food?"

Caltex did not have an immediate response to requests for comment.

KIS Asia Long Short Cayman Fund is bullish on cobalt, one of the metals used in producing batteries for electric cars. Cobalt prices have surged 141 percent after hitting a seven-year-low on Feb. 1, 2016. The fund also likes lithium, another material used in batteries, but "we need more cobalt and the supply is a bit more precarious," Best said. KIS has invested in a company linked to cobalt that Best declined to identify because the fund is "still building the position."

The KIS Asia Long Short Cayman Fund gained 0.24 percent in February and is up 1.7 percent so far this year. It rose 13.7 percent in 2016 and has gained 14.7 percent annualized since it started trading in October 2009.

Best is confident self-driving cars will soon become mainstream, backing Uber

 

Market Calls, Revisited

By Suzy WaiteEffissimo Capital Management, a Singapore-based activist fund set up by former colleagues of Yoshiaki Murakami, early last year boosted its stake in Japanese shipper Kawasaki Kisen Kaisha Ltd. Effissimo, which had been reporting a position on the company since September 2015, increased its stake to 25 percent, according to a filing with Japan's finance ministry on March 8. Kawasaki Kisen's shares had tumbled almost 40 percent in the previous year.

Shares in Kawasaki Kisen Kaisha are up 70 percent since March 1, 2016, compared with a 21 percent rise in the Topix Index. Effissimo in June increased its stake to over 33 percent, giving it certain veto power. The firm declined to comment.

Technologies Inc. Chief Product Officer Jeff Holden's prediction that they would be on the roads globally in two years' time.

"We think this is going to happen very soon," Best said. "I'm backing Jeff to get itdone in two years."

Ford, Volkswagen, Nissan, Toyota and Baidu have all predicted autonomous cars will be on the roads by 2020, he said.

Automotive insurance will also be impacted negatively by the surge in self-driving cars, Best said. "In the U.S., a number of insurers get 90 percent of their business from automotive insurance," he said. "The number of accidents will drop once self-driving cars become mainstream." Ninety-four percent of road deaths are caused by human error, according to the National Highway Traffic Safety Administration. This number will

drop to 120,000 deaths globally once autonomous cars become the norm, Best said.

This theme will take longer to play out, and KIS has not yet placed any short bets on insurers, Best said. "We're probably going to have to wait to see reasonable traction in terms of autonomous vehicles before we put them on," he said.

The biggest unknown about self-driving cars is regulation although there has been headway, Best said. Google has partnered with Uber Technologies Inc., Lyft Inc., Ford Motor Co. and Volvo AB, to form a Self-Driving Coalition for Safer Streets which focuses on lobbying lawmakers and regulators to clear a path for widespread use of autonomous vehicles, according to an investor letter from KIS.

— Suzy Waite

Spotlight

Josh Best

  Hedge Funds Asia 5  March 15, 2017

 

Spotlight

Oasis CIO Fischer Discusses Nintendo Switch, PanaHome, Activism

"Revolutionary" Nintendo Switch will help drive sales and share price.

Sees "real headway" in activist investing in Japan.

Interviewed by Suzy Waite on March 7. Comments have been condensed and edited. With assistance from Komaki Ito.  

Seth Fischer, chief investment officer, Oasis Management Company

Q: Tell me about Oasis.A: We are a multistrategy global fund in Hong Kong with an office in Austin, Texas. We are one of the only funds employing activist strategies in Asia. Seventy percent of our investments end up being focused in the region. I started off being focused on Japan in 1995 and it makes up 55 to 60 percent of our portfolio today.

Q: You've been invested in Nintendo for some time. Will the new console, the Switch, help the company's sales and stock price?A: Yes and yes. Historically Nintendo was a diehard console maker and game-ware maker, making hardware and software but only packaged together. We've been engaged with them publicly since 2013 to try to get them to have a change of heart and embrace mobile gaming and monetization and use of their intellectual property in theme parks, movies, online, TV shows and elsewhere. Their shares were around 10,000 to 11,000 yen when we first invested. Now they're around 25,000 yen. The Switch is revolutionary. It gives people the possibility of bringing the gaming experience out of their living rooms. That's the theme with mobile gaming too. That is awesome and shouldn't be underestimated. If you're going to go to a public museum because of Pokemon Go, that's great. And Nintendo are the only company that has systematic partnerships with museums, such as the Louvre, by using the Nintendo 3DS to give tours for kids. On Zelda Breath of the Wild, Zelda has a massive, passionate following. Tens of millions if not hundreds of millions of people know your IP. It's a win for Nintendo and it's a win for shareholders.

Q: Any other suggestions forNintendo's management?

I continue to give them gamingA:

 

 

suggestions and gave some as recently as two weeks ago. I'll let them work it out for now before talking about it publicly.

Q: You're increasing your pressure for Panasonic to sweeten its offer for PanaHome. What's the latest?A: I'm in contact with them quite frequently. We have a public campaign for all shareholders to speak up. I offered to buy PanaHome at 1,050 yen per share. We have a fair value opinion that their value as a company is 1,811 yen per share. Panasonic is prepared to pay 1,000 yen per share. I think there wasn't a proper process at all. PanaHome did not 'go shop' the deal. So we're continuing to seek and protect our rights and that includes taking this as far as it needs to go, including court. In the meantime we're advising shareholders to vote against this. This is really important for all shareholders but also from a corporate governance point of view. There needs to be a real independent process to protect shareholders. ["As PanaHome announced in a press release on Feb. 28, we believe that the exchange ratio was calculated through a fair and appropriate process," Panasonic spokeswoman Kyoko Ishii said. A PanaHome spokesman declined to comment.]

Q: What about Yingde?With Yingde, we just want to get the A:

highest price and would love Air Products to buy them for the right price. This whole situation goes to new iterations every day. If you want to think of 'Days of Our Lives,' it's pretty similar.

Q: Any new positions?A: Yes, we have a number of new positions but nothing we're prepared to talk about publicly.

Q: What's your outlook on the progress of activism in Japan?A: We're still in the early stages of discovering what a truly collaborative relationship can unleash in terms of earnings power for companies and returns for shareholders. There has been real headway there. But three of our active positions — Panasonic/PanaHome, Katakura and Toshiba Plant — are real litmus tests. There is no doubt the government is serious but we need to see real follow-through. The Council of Experts Concerning the Stewardship Code began meeting again in January to review how to further implement adherence to the spirit of the code, including increasing disclosure of individual votes.

At a Glance

Age: 44 (45 in April)Hometown: New YorkProfessional Background: Highbridge Capital Management, OasisHobbies: Running, learning, readingFavorite Runs in Hong Kong: "Stage 2 of Hong Kong Trail is my most frequent run. Tai Lam trails in the New Territories are fun. Lantau Peak and Sunset Peak are the hardest"Latest Departure Time From Office: 7amHypothetical Dinner Guests of Choice: "Depends on my mood. Ranges from King David, Rabbi Akiva, Alexis De Tocqueville, Edmund Burke, Thomas Paine, Prof. Michael Sandel and Prime Minister Abe"

Calendar

  Hedge Funds Asia 6  March 15, 2017

 

Calendar

DATE ORGANIZER(S) EVENT SPEAKERS/DETAILS/ATTENDEES OF NOTE LOCATION

March 21-23 WB Research TradeTech FX AsiaKewei Yang, Graticule Asset Management; , Lion William GohGlobal Investors; , Nikko Asset Management.  Woon Khien Chia

Singapore

March 27-30 Credit Suisse 20th Annual Asian Investment Conference

"Attended by prominent political, economic, financial, and academic figures, the conference attracts institutional and hedge fund investors as well as high-net-worth individuals and business leaders who seek access to influential ideas and actionable advice."

Hong Kong

March 28 Bloomberg Entity Exchange Launch CelebrationDocumentation requirements for investment managers and broker counterparties. E-mail ewei15@bloomberg.net for more information.

Hong Kong

April 11-12 Futures & Options World Derivatives World AsiaGovert Heijboer, True Partner; , RCMA Asset Michael ColemanManagement; , Efficient Capital; , Phillip Ernest Jaffarian Linus LimCapital; Rocky Hu, Olympus Hedge Fund Investments.

Hong Kong

April 20 Bloomberg Family Office Forum 2017 Available to attendees. Hong Kong

April 20-21 Altinvestor APAC 2017"...the only one of its kind ever produced to feature both family offices as well as institutional investors on a programme with a focus on Alternative Investments."

Singapore

April 24-26 Informa FundForum AsiaMisha Graboi, Paamco; , Mirae Asset Global Jung -Ho RheeInvestments (HK); , Prime Capital; , Jack Ling Andreas VogelsangerAsia Frontier Capital (Vietnam); , Arete Financial.Vineet Vohra

Hong Kong

May 15-16 Deutsche BankCapital Introduction and dbAccess Asia Conference 2017

"Over 60 Asia focused hedge fund managers from across the globe."

Singapore

May 18 Alternatives Summit Korea Hedge Fund & Multi-Asset Summit To be announced. Seoul

May 26 Eurekahedge Asian Hedge Fund Awards 2017 To commemorate the top-performing Asian hedge funds of 2016. Singapore

June 7 Karen Leung Foundation Sohn Conference Hong Kong Agenda, speakers to be announced. Hong KongDISCLAIMER: The information on this page was compiled by Bloomberg from multiple sources, public and private, and is deemed to be accurate, but not definitive or exhaustive. Questions about events should be addressed to the event organizer.

 

The "organizer" and "event" columns link to websites, where available. Names link to the individual's BIO page, where available, on the Bloomberg terminal. This functionality may be limited to terminal users viewing the Brief in Chrome browsers.    

Bloomberg Brief: Hedge Funds AsiaBloomberg Brief Managing Editor

Paul Smith

psmith152@bloomberg.net+44-20-3525-8653

Bloomberg News Editor

Sree Vidya Bhaktavatsalam

sbhaktavatsa@bloomberg.net

+852-2293-1577

Bloomberg News Reporters

Bei Hu

bhu5@bloomberg.net

+852-2977-6633

Klaus Wille

kwille@bloomberg.net

+65-6231-3658

Hedge Funds Asia Editor

Nathaniel E. Baker

nbaker14@bloomberg.net

+852-2293-1170

Contributing Editor

Melissa Karsh

mkarsh@bloomberg.net

+1-212-617-4557

Hedge Funds Asia Reporter

Suzy Waite

swaite8@bloomberg.net

+852-2293-1121

Contributing Reporters

Hema Parmar

hparmar6@bloomberg.net

+1-212-617-6990

Contributing Data Editors

Jamie Wong

wwong330@bloomberg.net

+852-2977-6453

Yuky Yip

syip46@bloomberg.net

+852-2293-1286

Marketing & Partnership Director

Courtney Martens

cmartens3@bloomberg.net

+1-212-617-2447

Advertising

Lucy Rosen

lrosen23@bloomberg.net

+1-212-617-6759

 

 

 

Reprints & Permissions

Lori Husted

lori.husted@theygsgroup.com

+1-717-505-9701 x2204

Interested in learning more about

the Bloomberg terminal? Request a

free demo .here

This newsletter and its contents may not be forwarded or redistributed without the prior consent of Bloomberg. Please contact our reprints and permissions group

listed above for more information. © 2017 Bloomberg LP. All rights reserved.