22/06/2011 Author: Tony Griffiths

Galaxy plans second China-focused Ucits

Galaxy Asset Management, the China-based hedge fund house, is planning to launch a second Ucits product, following the successful debut of its first in November 2010, HFMWeek can exclusively reveal.

Though still in the early stages of development, the new fund is expected to be based on the same strategy as Galaxy’s existing Deep Value vehicle, which employs an aggressive approach centred on finding value in undervalued stock in the Greater China markets.

Galaxy, whose range of four funds all use China-focused strategies, is hoping to launch the fund by the end of the year. While the offshore original is considered long-biased, the Ucits version will short using swaps, Galaxy spokesperson Eddie Kir said.  

 It has been a strong start to the year for Hong Kong and Shanghai-based Galaxy. The firm’s Ucits vehicle, launched last year via Merchant Capitals’ Ucits platform, is up 3.25% for the year at a time when most offshore funds, and many Ucits funds, are struggling following a tough May.   

And while the flagship fund, China Opportunities, the strategy on which the Ucits fund is based, is flat, down 0.09% YTD, the firm’s Deep Value and Special Situations funds are up 37.14% and 25.52% respectively. 
 
China-linked strategies have had mixed fortunes of late. The Galaxy China Special Situations Fund has produced strong returns, taking Hong Kong-listed shell companies and injecting them with mainland China projects with high-growth prospects, such as luxury goods retailers, that are looking to get listed.

The reverse strategy in the US has been less lucrative for investors. Reports this week suggested that recent losses at Paulson & Co’s flagship Advantage Fund came, partly, as a result of an unsuccessful investment in a Toronto-listed Chinese forestry firm.