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December 19, 2018  

FengHe Defies Trend in Asia's Equity Market

Asia-focused equity shop FengHe Fund Management has profited handsomely as the U.S.-China trade dispute has roiled Asian markets.

The Singapore firm’s FengHe Asia Fund was up 9.7% year-to-date through November, and continued to rise in early December, according to a performance report shared with investors this month. Compare that to the MSCI AC Asia ex-Japan Index, which was down 12% in the first 11 months of the year.

Meanwhile, the fund’s assets have more than doubled to $392 million since the start of the year.

FengHe continued to generate steady gains amid the market turbulence in October and November. FengHe Asia Fund rose 1.7% in October and 0.2% in November, while the MSCI index plunged 10.9% in October, then jumped 5.3% in November.

In the first 10 months of the year, FengHe cut its net exposure from more than 60% to less than 20%, in large measure by reducing its long positions. The portfolio has benefited in part by a focus on industries that aren’t directly affected by the U.S.-China trade war.

“The trade war sentiment fueled by greed and fear has driven the significant market volatility in Asian markets,” chief investment officer Matt Hu wrote in a letter to investors. “We focus on the certainty of the opportunities across the internet, healthcare and other consumer-related companies arising from the world’s largest domestic consumer market.”

Hu believes U.S. trade policies under the Trump Administration ultimately will benefit China. “After 30 years of reform and opening up in China, it had entered a period of reform ‘fatigue,’ and complacency had begun to surge in China with signs of economic crisis,” he wrote. “However, due to the recent pressure exerted by America, China’s reform and opening up is back on track and will accelerate.”

Since launching in December 2012, FengHe Asia Fund has generated a 15.1% annualized return, without a down year. The fund’s risk-adjusted returns are no less impressive, with a Sortino ratio of 4.25.

FengHe manages $1.1 billion overall, including its venture capital business.

Hu, previously an executive at China Securities, runs the firm with co-founder John Wu, an experienced venture capital investor who previously held key roles at Alibaba Group and Yahoo.