JF Funds launches Hong Kong’s first retail hedge fund

Hong Kong-based fund manager JF Funds is launching a hedge fund targeted at Hong Kong retail investors, and is preparing to launch a second similar fund some time next year. The two hedge funds, JF Greater China Absolute Return Fund and JF Asia Absolute Return Fund, have received authorisation from Hong Kong’s Securities and Futures Commission (SFC), giving the green light to JF Funds to market the funds to Hong Kong retail investors.

The Greater China fund is a macro-strategy hedge fund mainly invested in securities related to Hong Kong, Taiwan and China. “We continue to see a growing number of exciting investment opportunities in Hong Kong, Taiwan and China,” said Chung Man Wing, head of JF’s Greater China team, in a statement.

Initial offerings for the JF Greater China Absolute Return Fund are open from now to January 30 2003, at a subscription price of US$10 per unit and a minimum investment of US$50,000. The fund carries a preliminary charge of 5% of the subscription price. JF said it would close the fund to new subscriptions if total net assets exceed US$100 million.

The fund will include strategies such as equity long/short positions, some index and index futures positioning and forward currency exchange contracts, JF said. The fund manager said it would not invest in China ‘A-shares’ until key restrictions on foreign investors have been addressed by the Chinese authorities. At the same time, JF said it would cap its investments in China B-shares at 10% because of the lack of liquidity in the market and the inability to short sell stocks on that market. China’s B-share market is open to foreign investors, while the country’s A-share market is currently opening to qualified foreign investors.

A spokesman for JF Funds said the JF Asia Absolute Return Fund will be launched some time next year, but no timetable has yet been determined.

JF’s are the first two hedge funds to be granted such authorisation from the SFC. The move follows the Hong Kong government’s decision to open the hedge funds market to the city’s retail investors in May.

JF Funds is part of JPMorgan Fleming Asset Management, an asset management unit of US bank JP Morgan Chase.