MaunaKai brings quantitative edge to Asian investment

MaunaKai Capital Partners, a Hong Kong and Boston-based hedge fund start up, is set to launch its global market neutral long/short strategy during the first quarter of 2005. MaunaKai's Hong Kong-based partner Simon Nip expects to launch with $50 million under management, and hopes to see the fund grow to $500 million within the next three years.

"Most of our initial capital comes from our personal investments and from Asian high-net worth individuals and corporates," he says. "We also expect to attract European and US-based institutions to the fund as it grows in size and develops a track record."

The fund aims to make consistent returns, of 12% and above per annum, with volatility of about 7%.

The MaunaKai Capital Global Fund seeks to exploit information inefficiencies and behavioural biases in global markets using its proprietary quantitative research model. The model is information-intensive and is constantly updated using multiple data points including market trading data, stockbroker recommendations, company financial results, shareholding structures, etc. These various signals are all dynamically combined to generate a portfolio with an attractive risk reward profile, says the company.

"We use a very disciplined, structured and objective quantitative approach. Our quant model can screen up to 5,000 companies at one time," says Lewis Chan, Mauankai partner and head of research.

MaunaKai expects its strategy to have a particular edge in Asia. "Very few quantitative funds are active in Asia, and the securities markets are less developed here, so opportunities for our strategy are can be very rewarding," explains Chan.

He points out that MaunaKai's quant model needs to add a qualitative screening aspect to adapt to Asian markets. "In Asia, a lot of information asymmetries still exist, so it's very important for us to be on the ground here as we cannot rely purely on our data feeds," Chan notes.

MaunaKai's principals feel their complementary professional backgrounds make them well equipped to execute their strategy.

Nip brings Asian investment experience and relationships to the team, having worked in equity sales and trading at Goldman Sachs and Morgan Stanley. He is also familiar with start-up processes, having assisted KGI in building up its Asian investment banking business.

Chan, who researches and develops the fund's quant model, is a Harvard PhD graduate and ex-finance professor at Hong Kong University of Science and Technology. Adding hedge fund experience to the team is Boston-based partner Matt Van Vlack, who previously worked in a senior research position at $8 billion US quant fund Numeric Investors.

MaunaKai has appointed Deutsche Bank as its prime broker and HSBC as its fund administrator.