Foundation laid for hedge fund expansion

For the hedge-fund managers behind the Foundation China Opportunities Fund, it's time to get more aggressive regarding growing assets under management.

Run by Hong Kong-based Foundation Asset Management, the hedge fund has completed its rookie year with AUM of $13 million. It believes its strategy is scalable and it wants to grow to $250 million over the next year.

Its strategy is value-based, long-biased Greater China equities, stock picking red-chips, A- and H-shares Nasdaq and Macau listings. It has a maximum portfolio size of 50 names with no more than 15% of the portfolio in one stock.

There are two share classes. A-shares attract a fee of 1.5% and 15%, and B-shares are charged 2% and 20%.

Performance was 36% net for 2007. The fund was down 7.9% in January. The managers aim at a Sharpe ratio of over 1.5, but are targeting decent entry level prices for investments as opposed to volatility per se.

The Foundation fund was seeded for its establishment in 2007 by UOB Kay Hian and a British investor, CIM Investment Management.

Michael Liang is chief investment officer and portfolio manager. He used to work at UOB in sales and research and before then at DBS and Macquarie Bank. Alongside him are former colleagues at DBS, the chief financial officer Albert Tang and chief operating officer Kenneth Yeung.

Gross exposure is currently 59% and net exposure is 47%. The fund can use leverage, but is constrained by an internal cap on gross exposure of 130%.

Service providers are UBS as prime brokers, Citco Fund Services as fund administrators, Ernst & Young as auditors. Maples and Calders are offshore lawyers and Simmons & Simmons are the international lawyers.