This $3.3b Singapore firm is betting everything on China

APS Asset Management founder and chief investment officer Wong Kok Hoi said the company will devote its time and energy on generating the best returns in China. PHOTO: ST FILE

SINGAPORE (BLOOMBERG) - APS Asset Management is going all-in on China.

The US$2.4 billion (S$3.3 billion) Singapore-based firm will shut its non-China-focused strategies with about US$250 million of outside money to focus exclusively on Asia's largest economy, it said in a statement on Tuesday (Feb 18). Clients will either be able to get their capital back, or move into the China strategies.

"Although we have generated significant alphas in other markets within Asia, we feel that our clients are best served by us devoting all our time and energy on generating the best returns in China," founder and chief investment officer Wong Kok Hoi said. "APS henceforth will be a China house -- live, breathe and think China."

The shift in focus had been underway for some time. Exposure to China already makes up 90 per cent of the firm's assets under management, and Wong partially relocated to Shanghai about six months ago. APS was one of the earliest Asia managers to win a mandate to trade yuan-denominated shares in China, too.

But it also comes as Western sovereign wealth, endowment and pension funds look to increase their exposure to China, preferably through relatively large, established operators. While the short-term outlook has been hurt by pro-democracy protests in Hong Kong, the coronavirus outbreak and domestic credit tightening, most market watchers agree that the nation's economy and local consumption will continue to grow over the longer term.

Asset managers like hedge funds are also facing rising redemptions as clients question the value of paying high fees at a time when index funds are delivering strong returns.

APS's main selling point is its in-depth China market research; most of its assets are concentrated in long-only China-focused funds, including shares in companies that trade on the mainland Chinese and Hong Kong stock exchanges, as well as US-listed ADRs.

President of North America and Europe, Ken Chung, said the shift wasn't to do with cost cutting, or a reflection of the performance of non-China strategies. The firm's Asia-Pacific long-short strategy has generated an annualized return of about 12 per cent since inception in 2008, he said.

Some of the group's best-known strategies have been contrarian takes on big Chinese companies such as Inc. Its China long-only strategy gained 33.1 per cent in 2019 and has delivered an annualized return since inception of 17.8%.

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