Post on 18-Nov-2014
PCM Asia Pioneer FundPCM Asia Pioneer Fund
Sept 2008Strive for picking Strive for picking ““RISING STARSRISING STARS”” in Asiain Asia
2For Professional Investors Only
AGENDA
• Hedge Fund in Asia and Rising Star Concept• Investment Philosophy, Objective, & Process • Asset allocation & Performance Analysis• Fund Details• Company Overview
• Appendix – More on Investment Process- Biography of Key Members
3For Professional Investors Only
HEALTHY MICRO ENVIRONMENT-Improving Fundamentals for Most Asian Corporations
• Robust Corporate Earnings Growth: 14% EPS Growth in 2007
• Stronger Balance Sheets: Lower Debt Ratio, Higher Cash Level, etc…
• Increasing Understanding of Shareholder Value, Corporate Governance & Transparency
• Improving Capital Utilization
• From Family Monopoly to Professional Management
Broaden high quality investment universe
ECONOMIC CONDITIONS IN ASIA
High GDP Growth Strong Export Growth
Low Inflation Environment
High FDI InflowsIncreasing Foreign Exchange Reserve
STRONG MACRO MOMENTUM
Increasing Domestic Consumption
4For Professional Investors Only
ASIAN FINANCIAL MARKET
Source: World Federation of Exchanges Source: Bank of International Settlements
5,043
3,8534,955
3,997
7,524
11,838
0
2,000
4,000
6,000
8,000
10,000
12,000
200620042002200019981996
221 237
380
0
50
100
150
200
250
300
350
400
2000 2002 2006
Rising Equity Market Capitalization In Asia
(Billions US dollars)
Development of Asia Fixed Income Markets
(Billions US dollars)
5For Professional Investors Only
ASIAN FINANCIAL MARKET
56,410 56,933
137,701
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2000 2002 2006
9 28
532
0
100
200
300
400
500
600
2000 2002 2006
Source: Bank of International SettlementsSource: Bank of International Settlements
Growth of Derivative Financial Instruments Traded
On Organized Exchanges - In terms of turnover value
(Billions US dollars)
Notional Amounts Of Outstanding of
OTC Equity-linked Derivatives
(Billions US dollars)
6For Professional Investors Only
BOOST OF ASIAN HEDGE FUNDS
Asian Hedge Fund Growth Over the Years
Source: Eurekahedge, Key Trends in Asian Hedge Funds, March 2007
7For Professional Investors Only
HUGE INVESTMENT OPPORTUNITIES FOR ASIAN HEDGE FUND MANAGERS
• Strong economic growth across Asian countries like China, India,etc…
• Relatively inefficient compared with western markets
• Improving width and depth of Asian financial markets in recent years– Creating a more favorable investment environment for hedge fund managers
• Asian hedge fund is still in the early stage of development– More and more talented traders, long-only or hedge fund managers are
entering the hedge fund business
8For Professional Investors Only
“RISING STAR” CONCEPT (I)
LARGE IS BEAUTIFUL?
• Recent study concluded that smaller-sized hedge funds significantly outperformed larger ones
5.72%5.89%6.31%Annualized standarddeviation
11.93%12.50%15.46%Annualized return
> USD 500 millionsUSD 100 - 500 millions
! USD 100 millions
Source: “Examination of Fund Age and Size and Its Impact on Hedge Fund Performance”, Derivatives Use, Trading & Regulation, Feb 2007, PerTrac Financial Solutions
9For Professional Investors Only
“RISING STAR” CONCEPT (II)
Young hedge funds showed superior risk adjusted return to older funds in the study
Source: “Examination of Fund Age and Size and Its Impact on Hedge Fund Performance”, Derivatives Use, Trading & Regulation, Feb 2007, PerTrac Financial Solutions
LONGER HISTORY IS SUPERIOR?
Young Funds(0-2 years) Mid-age funds
(2-4 years)
Older funds(4 years above)
0.00%
4.00%
8.00%
12.00%
16.00%
20.00%
5.90% 6.10% 6.30% 6.50%
AnnualizedStandard Deviation
Annualized Return
10For Professional Investors Only
“RISING STAR” CONCEPT (III)
DOES A FUND’S AGE MATTER?
Sharpe ratio versus age Average monthly hedge fund returns by age & coincident average returns of the S&P500 and Lehman Aggregate Bond
11For Professional Investors Only
INVESTMENT PHILOSOPHY
! Strong economic growth in Asia provides enormous investment opportunities, especially in emerging markets such as China, India, Indonesia, etc…
! Talented emerging hedge fund managers can extract “Alpha” in such relatively inefficient emerging market.
! Proper diversification and stringent risk management are of utmost importance for success.
PCM ASIA PIONEER FUND
PCM Asia Pioneer Fund strives for picking PCM Asia Pioneer Fund strives for picking ““RISING STARSRISING STARS”” in Asiain Asia
““ASIA + RISING STARASIA + RISING STAR””
12For Professional Investors Only
! PCM Asia Pioneer Fund is a fund of funds investing in Asia (ex Japan) hedge funds. While the Fund will invest into certain conventional hedge fund strategies, it will also include some relatively aggressive strategies to capture growth opportunities and diversify further.
! The Fund seeks to FULLY capture Asian market upside with approximately HALF the volatility involved and 1/3 of the downside risk.
! Target Annual Return: 14%-18%
! Target Annual Volatility: 7%-9%
PCM ASIA PIONEER FUND
INVESTMENT OBJECTIVE
13For Professional Investors Only
INVESTMENT PROCESS – TOP DOWN
Our investment approach is a combination of top down and bottom up approach
TOP DOWN APPROACHTOP DOWN APPROACH
MACRO ECONOMIC EVALUATION• Economic cycle• Equity market valuation• Liquidity• Yield spread
• Credit rating outlook• Corporate earnings growth• Corporate activities level
• Evaluate Suitable Strategies with Favorable Risk/Reward• Assess Potential Risk Via Scenario Analysis
STRATEGY RISK & REWARD ANALYSIS
TATICAL STRATEGY & GEOGRAPHICAL ALLOCATION
14For Professional Investors Only
BOTTOM UP APPROACHBOTTOM UP APPROACH
Phase 1Phase 1
Manager Manager IdentificationIdentification
Phase 2Phase 2
Quantitative Quantitative & Qualitative & Qualitative AnalysisAnalysis
Phase 3Phase 3
Manager Selection Manager Selection & Portfolio & Portfolio ConstructionConstruction
Phase 4Phase 4
Risk Management Risk Management & Continuous & Continuous MonitoringMonitoring
Managers Filtering Undergo thorough due diligence process with potential Managers
Select outstanding managers that fit into our investment philosophy. Construct optimal portfolio
Perform risk analysis study, active monitoring and review of portfolio
INVESTMENT PROCESS – BOTTOM UP
No. of Funds :No. of Funds :
1000 1000 "" 350350
No. of Funds : No. of Funds :
350 350 "" 170 170 "" 5050
No. of Funds :No. of Funds :
5050 "" 20+20+
15For Professional Investors Only
PCM PROPRIETARY SCORING SYSTEM
!
"
#
$
%
&!
Information Edge
Analysis Edge
Decision Edge
Investment Process
Risk Management
Return Profile
Scoring Criteria•People
-Assess CIO, Portfolio Manager, Research Analyst’s Investment expertise
• Process
-Evaluate the soundness & repeatability of investment methodology
• Risk Management
•Quantitative
-Numerical Analysis to show Fund’s Characteristics
NO INVESTMENT WILL BE MADE WITHOUT AN
ON-SITE DUE DILIGENCE MEETING
NO INVESTMENT WILL BE MADE NO INVESTMENT WILL BE MADE WITHOUT AN WITHOUT AN
ONON--SITE DUE DILIGENCE MEETINGSITE DUE DILIGENCE MEETING
16For Professional Investors Only
PCM 3-Level Risk Management
INVESTMENT RISK
OPERATIONAL RISK
PORTFOLIO RISK
• On site investment due diligence
• PCM Proprietary scoring system
• Detailed operational due diligence
• Stringent risk management guidelines
• Statistical portfolio optimizer
LEVEL 1
LEVEL 2
LEVEL 3
17For Professional Investors Only
“Rising Star” in our portfolio is generally characterized by, ! CIO has proven track record in managing asset for other institutions. ! CIO has experienced various market cycles in own specialized area. ! Risk awareness is high which translated into rigorous risk management
commitment.! Owned by a few key persons who put substantial personal wealth in the fund.! Passion in investment and strong desire to succeed. ! Relatively small in scale but properly set up infrastructure. ! AUM in the fund grows rapidly.
Key Facts
! On average CIO of each fund has over 18 years of experience in the industry.
! About 1 out of 10 funds we visited fits in with this characteristic.! Those with less than 3 years track record and AUM under USD
100m account for around 50% of our portfolio.
Key FactsKey Facts
!! On average CIO of each fund has over 18 years of experience in On average CIO of each fund has over 18 years of experience in the industry.the industry.
!! About 1 out of 10 funds we visited fits in with this characterisAbout 1 out of 10 funds we visited fits in with this characteristic.tic.!! Those with less than 3 years track record and AUM under USD Those with less than 3 years track record and AUM under USD
100m account for around 50% of our portfolio. 100m account for around 50% of our portfolio.
ASSET ALLOCATION – Rising Star
18For Professional Investors Only
100,000100,0001,000,000MINIMUM SUBSCRIPTION (USD)
--UP TO 5%SUBSCRIPTION FEE
MonthlyMonthlyMonthlySUBSCRIPTION FREQUENCY
MonthlyMonthlyMonthlyREDEMPTION FREQUENCY(With 45 days prior written notice)
PCMAPFC KY
Twice a year;4% of the NAV of Oct & Apr
5% in Year 1, reduces by 1% p.a.
15% (High Watermark)
1.75%
10,000
CLASS C
PCMAPFB KY
-
5% in Year 1, reduces by 1% p.a.
15% (High Watermark)
1.5%
10,000
CLASS B
PCMAPFA KYBloomberg Code
-DIVIDEND
-REDEMPTION FEE
10% (High Watermark)PERFORMANCE FEE
1%ANNUAL MANAGEMENT FEE
10,000MINIMUM SUBSEQUENT INVESTMENT (USD)
CLASS A
FUND DETAILS
PCM ASIA PIONEER FUND
19For Professional Investors Only
FUND DETAILS
Fortis Prime Fund Solutions Bank (Ireland) LimitedCUSTODIAN:
PricewaterhouseCoopersAUDITOR:
PCM Capital LimitedINVESTMENT ADVISOR:
Offshore: OgierLEGAL ADVISOR:
Fortis Prime Fund SolutionsADMINISTRATOR:
PCM Capital (International Group) LimitedINVESTMENT MANAGER:
SERVICE PROVIDERS
20For Professional Investors Only
COMPANY BACKGROUND
• PCM Capital Limited (PCM) is duly licensed with the Securities and Futures Commission (“SFC”) and is regulated primarily by the Securities and Futures Ordinance (“SFO”) in Hong Kong; to provide investment advisory and asset management services for investors with focus in alternative investment tools.
• PCM team had gained rich professional experiences and extensive knowledge in the asset management and financial service industry, which we believe to be crucial for success for investing in Global markets and accessing to information.
• We also dedicate to complement our strength by building up alliance with independent specialists in specific area to ensure that solid infrastructure and quality products can be delivered.
• PCM strives to provide professional services for clientele range from high net worth individuals to institutions who aim to diversify portfolio risk in investing in alternative asset classes targeting absolute performance under various market cycles.
• In the future, we will further expand our team in global market with focus in Asia to ensure that we can ride on the growth of the fast growing hedge fund industry for our investors.
21For Professional Investors Only
Key Benefits for investing in PCM Asia Pioneer Fund
PCM ASIA PIONEER FUND
## Generate absolute return by investing in those creating alphaGenerate absolute return by investing in those creating alpha
! Identify talented “RISING STARS” elites
! Dedicate to Asia with emphasis on Greater China
## Manage risk under various market environmentsManage risk under various market environments
## Dividend payment (Class C) provides income alternatives for inveDividend payment (Class C) provides income alternatives for investors stors
! Control risk through stringent risk management
! Select strategies with hedging against market cycles and those can benefit from market volatility
! Diversify portfolio in funds and strategies
22For Professional Investors Only
DISCLAIMERS
The fund of the PCM Capital (International Group) Limited (“Investment Manager”) and PCM Capital Limited (“Investment Advisor”) is an exempted company incorporated with limited liability under the law of the Cayman Islands. Applications for Shares of the Fund can only be made on the basis of the current offering memorandum of the Fund. Investing in the Shares of the Fund (“Shares”) involves certain risks, as more fully described in the offering memorandum. There can be no assurance that the investment objective of the Fund will be met or that its investment program will be successful. Shares have not been and will not be registered under any securities laws of any other countries or areas subject to its jurisdiction.
This is neither an offer to sell nor a solicitation of an offer to purchase any securities. Such offer or solicitation may only be made pursuant to the current offering memorandum of the Fund that will be provided only to qualified offerees. Any investment decision with respect to the Fund should be based upon the information contained in the offering memorandum of the Fund. Past performance is not necessarily indicative of future results.
The information and opinions contained in this document are for background purposes only and do not purport to be full or complete. No reliance may be placed for any purpose on the information or opinions contained in this document or their accuracy or completeness. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained in this document by the Investment Manager / Investment Advisor and no liability is accepted by the Investment Manager / Investment Advisor for the accuracy or completeness of any such information or opinions.
The Investment Manager / Investment Advisor believes that the source of this information is reliable however it cannot and does not guarantee, either expressly or implicitly, and accepts no liability for, the accuracy, validity, timeliness, merchantability or completeness of any information or data (whether prepared by the Investment Manager / Investment Advisor or by any third party) for any particular purpose or use or that the information or data will be free from error. The Investment Manager / Investment Advisor does not undertake any responsibility for any reliance which is placed by any person on any statements or opinions which are expressed herein. Neither the information nor any opinions expressed herein constitute a solicitation by the Investment Manager / Investment Advisor for the purchase or sale of any securities or other financial instruments. Neither the Investment Manager/ Investment Advisor, nor any of its affiliates, directors, officers or employees will be liable or have any responsibility of any kind for any loss or damage that any person may incur resulting from the use of this information.
The information contained herein is solely for information purposes, is current as of the date indicated above and is subject to change from time to time. None of the Fund, the Investment Manager / Investment Advisor, or other persons or entities named herein are obligated to notify you of changes to this information and none of the foregoing assume any responsibility for any loss suffered in reliance on this information. This information may not be reproduced or distributed in whole or in part nor may its contents be disclosed to any other person under any circumstance.
AppendixAppendix
More On Investment ProcessMore On Investment Process--Bottom Up ApproachBottom Up Approach
Biography of Key MembersBiography of Key Members
1.1.
2.2.
24For Professional Investors Only
MORE ON INVESTMENT PROCESS - BOTTOM UP APPROACHPHASE 1 – MANAGER INDENTIFICATION
• Personal network• Prime brokers/ custodian• Industry database
• Financial news• Industry journals• Hedge fund manager referrals
Build up Asia Hedge Fund Universe:
1000+
Identify managers complying with our
investment mandate:
350+
Manager identification through :
25For Professional Investors Only
PHASE 2: QUANTITATIVE & QUALITATIVE ANALYSIS
Screen managers for due diligence
and analysis: 170+
Select managers for
portfolio construction:
50+
Build up Asia Hedge Fund Universe:
1000+
Identify managers complying with our
investment mandate:
350+
$ Historical Performance$ Risk & Return Analysis$ Correlation Analysis$ VAR Analysis
$ Investment Due Diligence$ Operational Due Diligence
Quantitative Analysis Qualitative Analysis
26For Professional Investors Only
PHASE 2: QUANTITATIVE & QUALITATIVE ANALYSIS -OPERATIONAL DUE DILIGENCE
Background % Reference check on key
personnel % Check license status and
any complaint, litigation proceedings
Valuation % Valuation policy & process% Independent pricing sources% Timeliness
Legal & Compliance% Fund structure% Registration status of the
fund companies% Service providers% Documentation checking
Internal Control% Soft dollar & personal trading
rules% Conflict of Interest% Organizational structure
5 KEY ASPECTS:
Investor Reporting% Information quality% Responsiveness% Timeliness% Transparency
27For Professional Investors Only
PHASE 3: MANAGER SELECTION & PORTFOLIO CONSTRUCTION
• Around 50+ potential Asian Hedge Funds are selected into our “Prime-List” after PHASE 2
• PCM’s investment committee will then construct the portfolio
Build up Asia Hedge Fund Universe:
1000+
Identify managers complying with our
investment mandate:
350+
Screen managers for due diligence and analysis:
170+
Construct final
Portfolio:20+
Select managers for
portfolio construction:
50+
Portfolio Construction
28For Professional Investors Only
PHASE 3: MANAGER SELECTION & PORTFOLIO CONSTRUCTION
TACTICAL ASSET TACTICAL ASSET ALLOCATIONALLOCATION
PCM SCORING SYSTEM
RISK MANAGEMENT GUIDELINES
PCM PROPRIETARY STATISTICAL PORTFOLIO OPTIMIZER - ARBITRAGIS
Final Portfolio About 20-50 Funds
PORTFOLIO CONSTRUCTION
OPERATIONAL DUE DILIGENCE50+ 50+
Focus Focus Fund Fund
PortfolioPortfolio
29For Professional Investors Only
PHASE 4: RISK MANAGEMENT & CONTINUOUS MONITORING
PCM Risk Management Guidelines
PCM Risk Management Guidelines
Diversification
•No. of Sub Hedge Funds:-Minimum: 12-Maximum: 60
•3-10 Strategies
Investment Limits
•Manager Weighting Limit ! 15%
•Strategy Limit-Equity Long-Short: ! 75%-Other Strategies:! 25% each
Stop Loss Policy•Investment team will have an drawdown forecast for each underlying fund under normal market situation
•If actual drawndown"75% of Estimated drawdown "Review•If actual drawdown "100% of Estimated drawdown "Stop-loss
Liquidity & Turnover
•Target Liquidity:-50% liquid in 3-month-90% liquid in 6-month
•Target Turnover Range:-10-30%p.a
Market Limits
•Individual Asian Markets ! 33%•Greater China ! 60%•Pre-IPO and/or Private Equity! 10%
Operational Due Diligence (ODD)
•All the underlying funds must pass the ODD test
30For Professional Investors Only
CONTINUOUS MONITORING
Onsite due diligence visitsYearly
Communications with the service providers On-going
Formal Conference Call to keep updates of investment views & market comments
Monthly~Quarterly
Review performance of existing managers ( Risk & Return, Investment strategy, Inter-strategies/ market correlation)
Weekly~Monthly
CONTINUOUS
MONITORING
RISK
MANAGEMENT
PCM ASIA PIONEER FUND
PORTFOLIOBOTTOM UP TOP DOWN
PHASE 4: RISK MANAGEMENT & CONTINUOUS MONITORING
31For Professional Investors Only
KEY MEMBERS
Norman Chan, Chief Investment Officer
• Norman Chan is the Chief Investment Officer of PCM and is responsible for daily portfolio management for Fund of Hedge Funds. He leads the investment research team in macro research, asset and strategy allocation, and fund manager selection. Mr. Chan has 14 years of professional experience and has been conducting research work on hedge fund including performing due diligence on global hedge funds since 1998.
• Prior to PCM, Norman was the Investment Director and Responsible Officer for Altruist Financial Group, leading the investment team to perform macro economic research and asset allocation for the group. During the four years he was with the company, he was responsible for the strategic allocation and portfolio management of its clients’ assets and proprietary assets totalling approximately USD 270 million.
• Prior to Altruist Financial Group, Norman was the Head of Investment Research at Allen Perkins Ltd., and was responsible for building up its hedge-fund research division in 1998. During the six years with Allen Perkins Ltd., Mr. Chan personally performed on-site due diligence on over 150 hedge funds in the United Kingdom and the United States.
• Norman graduated from Golden Gate University in San Francisco, California, U.S. with a Bachelor of Art Degree in Business Economics. Norman has been serving as part-time lecturer for financial related professional courses for associations and academic institutions in Hong Kong such as Hong Kong Polytechnic University since years ago.
32For Professional Investors Only
KEY MEMBERS
Ivy Chow Wing, Chief Operating Officer
• Chow Wing (Ivy) is the Chief Operation Officer of PCM, oversees the compliance, operation and finance functions of the PCM. Ms. Chow gained extensive and rich professional experiences in fund management and investment advisory service in the last fifteen years, covering mutual fund, unit trust, fund of funds/hedge funds, hedge fund and alternative investment.
• Prior to joining the PCM Capital Ltd., Ivy was the Head of Operation & Compliance of a leading hedge fund company, MCP Asset Management Co., Ltd. until the beginning of August 2006, the company managed the assets of funds of hedge funds and hedge funds over USD 4 billion.
• She also worked at a number of international corporations including Yamatane Investment Management (HK) Co. Ltd., Dean Witter Reynolds (HK) Ltd. and Standard Chartered Bank HK Trustee Ltd. where she was principally involved in accounting, finance, operation, business & budgetary planning, compliance, trading of financial instruments, financial asset management, investment adviser and fund administration.
• Ivy holds a Master degree in Finance and a Bachelor degree in Commerce Accounting. She is a qualified CPA.
33For Professional Investors Only
KEY MEMBERS
Florence Lo, Senior Hedge Fund Analyst
• Florence Lo is the Senior Hedge Fund Analyst in PCM and is responsible for executing hedge fund due diligence and research process. Florence has over 9 years of experience in financial industry and has been involved in many research roles including hedge funds, alternative investments and equity markets in her careers.
• Prior to PCM, Florence worked as a Hedge Funds Research Manager in the Alternative Investment Division in SHK Fund Management Limited, responsible for identifying potential hedge fund managers, conducting manager due diligence and generating specialized fund of hedge funds research.
• Florence graduated from University of Toronto, Canada and holds a Bachelor of Commerce and Finance, specialist in Commerce and Finance, major in Economics and minor in East Asian Studies.
Andrew Li, Research Analyst
• Andrew Li is the Research Analyst in PCM and is responsible for executing hedge fund due diligence and research process. Andrew has 3 years of experience in the financial industry in research roles, portfolio management and business development.
• Prior to PCM, Andrew was an Equity Research Associate with Lightyear Capital, a Canadian small-caps brokerage company, supporting the analyst team in research by building financial models and writing earnings notes. Subsequently, he became an Associate Portfolio Manager with Hemisphere Capital Management, a Canadian investment counselor, where he conducted due diligence on companies.
• Andrew graduated from the University of Toronto, Canada and holds a Bachelor of Applied Science (electrical engineering) and graduated from INSEAD, France with a MBA. He is a FRM, CAIA and CFA Charter holder.