AsianInvestor 2003 Achievement Awards: Day Four

Hedge funds:

Japan long/short strategy

Blue Sky Japan

The sole manager of this fund, Sydney-based Michael Hill, has shown great skill in reading the movements of the volatile Japanese equity market and this is reflected in the 16.17% return in 2002. The $37 million fund was launched in May 2000 and has Hill as the largest investor. The fund can go from net long to net short very quickly by running a fairly liquid book, an ideal trait when investing in Japan. During the 1990s Hill managed proprietary money at IBJ, now Mizuho Financial, and Merrill Lynch. The Irish Stock Exchange-listed fund runs strict stop losses on short positions, and if the fund experiences a 10% drawdown the majority of the fund is liquidated and the strategy reassessed.

Hedge funds:

Asia long/short strategy

Doric Focus Fund

A tightly focussed process, stressing understanding of the businesses it invests in or shorts, has lead to a great year for the Doric Focus Fund. Michael Nock, managing director of Doric Capital, began the fund as a traditional long-only strategy but made the change to a hedge fund due to the desire for a full set of investment tools to generate returns. With the help of his team of seven and the input of a professor from Australia, Nock has put those tools to good use. Nock has over 20 years experience working in the securities industry in Asia and Australasia, including time with Bain & Company and Merrill Lynch. He was also the founder of Anderson Man Investment Services and managing director of ED&F Man Pacific. His fund, which invests in Asia ex-Japan, states its objective is long-term positive total returns targeted at +15% per annum. It surpassed that in 2002 with an amazing 27.3% return.

Hedge funds:

Best start-up

Asuka Japanese Equity Long/Short Fund

The fund began with $20 million, but tremendous growth in the space of just a few months buoyed its assets to the current $68 million. The fund was up 5.5% in the first four months of operation after its inception in September 2002. The manager, Yoshihiro Hirao, has over 10 years experience in trading long/short positions in the Japanese equity market. He most recently was at Tudor Capital, where he was director in charge of Japanese equity. Prior to that, he was a managing director and co-head of Salomon Smith Barney's Japan and Asia proprietary trading department. While at Salomon he traded as principal manager for its ¥80 billion convertible bond/warrant arbitrage portfolio as well as its equity long/short portfolio. The Asuka fund's focus is on the top-500 stocks on the Tokyo Stock Exchange but smaller names are also covered if the manager feels they are a good opportunity.

Hedge funds:

All strategies

ADM Galleus

The ADM Galleus Fund saw impressive returns over 2002 and even more impressive investor interest. Asia Debt Management is doing something right: it won this same award last year. The fund saw an astonishing increase in the number of investors with assets rising from $32 million mid-2002 to its current size of $110 million. Galleus is the flagship fund of ADM Capital, the Hong Kong based distressed debt manager. The fund is managed by Chris Botsford, Robert Appleby and Dennis Firth. The firm has an investment programme of over $800 million. The distressed debt investments did so well that Galleus returned 20.79% in 2002, prompting ADM to no longer actively market it. Thanks to a steady pipeline of incoming investments, the managers plan to close the fund at $250 million.

Hedge funds:

All strategies

Vertex Capital Management Relative Value Fund

After a difficult year in 2001, Kim Ivey and Craig Turnbull pulled out all the stops in 2002 and returned an impressive 29.73% in 2002. With over 80 years combined experience in the Australian markets, the firm's investment professionals have a wealth of knowledge to rely on. Kim Ivey is the chief investment officer with 17 years the industry. He spent five years as senior portfolio manager and head of risk management at Commonwealth Financial Services, part of Commonwealth Bank of Australia. Turnball joined the firm in November 2001 and is credited with contributing to the consistency of the fund's returns. The fund trades the Australian Stock Exchange Top 100, taking long and short positions based on proprietary investment models.

Hedge funds:

All strategies

Basis Aust-Rim

Completing a 20-month run of positive returns at the end of 2002, Basis Capital's Basis Aust-Rim fund achieved a 13.5% return in 2002. Steve Howell and Stuart Fowler are the co-founders of the firm with Howell acting as the chief investment officer. Howell has worked in the Asia-Pacific markets for 20 years. Before establishing Basis with Fowler four years ago, Howell headed up America Express's capital markets trading group in Singapore. The fund employs a multi-strategy approach in search of relative value and arbitrage opportunities across fixed income, convertibles and to a lesser extent equities. Basis Capital invests in Japan, Australia, New Zealand and the rest of Asia. The fund recently had a soft close at $100 million.

Best Prime Brokerage

Goldman Sachs

In the secretive world of securities lending it is sometimes difficult to compare players. But if client wins and successful forays into new markets are a measure of performance, then Goldman Sachs is the clear winner of this category for the second year running. The firm claims a win/loss ratio for new accounts in 2002 of 34 wins and six losses; and also claims to have stolen six accounts from a competitor.

But where Goldman Sachs really shone in 2002 was in Korea where it masterminded the first significant stock loan deal under new rules introduced by the government that give prime brokers access to local securities held by foreign fund managers. Goldmans wowed the market by choosing the less conventional route of intermediating through the Korea Securities Dealers' Association (instead of the Korea Securities Depository) and in the process paved a cheaper, less complicated and more tax friendly route into the local market. Its structure has since been copied.

The challenge ahead for Goldman Sachs is to hang on to its leadership in Asia and fend off quality competition from prime brokers such as UBS, Deutsche Bank and archrival Morgan Stanley.

Best Fund Administrator

HSBC

Volume matters in a business with narrow margins, and in 2002 HSBC streaked ahead, increasing the size of its fund services book by 48%. This stellar effort takes the bank's total assets under administration to just over $50 billion. The lion's share of this is still in Hong Kong but in the last 12 months there has been a clear commitment to expanding its business from the SAR and Singapore to other Asian markets. It now provides fund administration services in eight Asian markets including India, Indonesia and Sri Lanka.

Last year HSBC picked up two notable accounts including a $1.6 billion government mandate and another sizable deal from a blue chip UK manager. Commenting on its decision to select HSBC, the former said: "We carried out a thorough search and performed a detailed due diligence process. We were particularly impressed with HSBC's new investor services system (which was launched in April 2002)." Others praise the bank for its responsiveness to client needs, its flexibility and its technical expertise. HSBC's own customer survey recently turned up a 70% client satisfaction level, an increase of 16% on a poll completed two years earlier. "HSBC give big service to even the small accounts," says one contented client.

Best Agent Securities Lender

Northern Trust

Looking back on the achievements in 2002, Northern Trust's entry into the Korean securities lending markets stands out as a clear triumph. The custodian has provided borrowers and intermediaries with a cheaper n customer-orientated alternative to the Korea Securities Depository, which until this year monopolized lending Korean assets. Northern Trust is the first custodian to crack this tough, highly regulated market and answer the demand of big international borrowers like Goldman Sachs and Merrill Lynch, who use the securities for arbitrage purposes or for on-lending to hedge funds. The coup is particularly important at a time when Korea is one of the only markets in Asia to retain significant trading volumes.

Northern Trust initiated securities lending in Asia when it established its Hong Kong office in 1995, and now has a lendable pool of Asian securities worth $22.7 billion, with average daily outstandings of $4.6 billion.

Communications Awards: co-sponsored by the Hong Kong Retirement Schemes Association

Small plan (under HK$100 million in assets)

Love Plus Holdings

Fund management service: Bank Consortium

Catering, along with construction, is among the most difficult industries to provide retirement services to because it employs casual labour with high turnover rates. This three-year old company, nonetheless, demonstrated the kind of commitment to communicating retirement services that we expect from blue chip companies. It is evident that Love Plus genuinely cares about its employees and we wish to recognize that.

MPF plans are complicated and Love Plus' original service provider failed to keep up with the administration. The company was proactive and set up an industry plan with Bank Consortium Trust, which launched an intense education campaign. As a result of this experience, Love Plus maintains steady communications about retirement services, with regular meetings with both the trustee and employees to update them on changes. It has also further consolidated its plans to make communication simpler.

Large plan (over HK$100 million in assets)

Television Broadcasts

Fund management service: Bank Consortium

TVB won this award last year, because we liked the way it handled establishing an MPF programme in a simple and convenient manner. This year the judges were initially inclined to serve this award to other entrants, to spread the glory. But TVB earned it for the second time in a row. TVB has demonstrated an ongoing commitment to keeping its employees in touch with what's happening in their retirement account - recognizing that while MPF results may not be a company's priority in these hard times, it's important to employees.

Unlike other candidates, which regurgitated how they had set up an MPF plan, TVB showed us its proactive correspondence with employees, which included comparisons of investment performance by its fund manager, under the care of Bank Consortium, and other MPF providers, so employees can see exactly how they're faring compared to all of Hong Kong. TVB even sponsors a quiz with a prize draw to test employees' knowledge of MPF updates, such as guessing the date of the recent amendments to MPF legislation. (And no, AsianInvestor didn't get it right.) Last, TVB has been expanding employees' fund choices.