Chinese Hedge Fund Opens in US

Hywin Capital Management, based in Shanghai, has launched a new, multi-manager hedge fund that is targeting 8% to 15% annual returns with minimal drawdowns, according to Gib Dunham, managing director and the portfolio manager of the fund.

The quantitative fund will allocate assets to four primary sectors, including relative value, private credit, quantitative, and zero correlation, Dunham said.

He added that the focus of the fund is to combine managers with the proven ability to generate excess returns over benchmark indices, manage drawdowns, and provide returns that are uncorrelated with the broad industry benchmarks.

Zhu Shuming, president of Hywin Capital, said China’s hedge fund industry is still growing and not many Chinese investors are familiar with alternative investment strategies.

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“Probably more than 90% of Chinese investors’ portfolios are in real estate. In fact, we bring the concept of investment portfolio to our investors to diversify risks and gain returns,” said Zhu.

The first hedge funds in China were recognized legally in 2013. Since then, expansion has been slow due to China’s nascent financial services infrastructure. Still, the Asset Management Association of China said there are more than 27,000 hedge funds registered in China as of 4Q 2016.

Zhu said Hywin Financial Holding Group, Hywin Capital’s parent company, has established multiple overseas offices to introduce a variety of investment vehicles to wealthy Chinese investors and help diversify their portfolios.

“The launch of this multi-manager product is significant to our Chinese investors because it’s an asset class most of them don’t have access to,” said Dunham.

Hywin Financial Holding Group is a multi-national conglomerate with more than 5,000 employees worldwide and approximately $15 billion in assets under management.

Founded in 1989, the company has expertise across multiple asset classes, including hedge funds, real estate, insurance, asset management, private equity, and lending.

Tags: China, Chinese, Hedge Fund, Hywin, Zhu Shuming

The UK’s The Pensions Regulator (TPR) has approved a deal for British vacuum cleaner manufacturer Hoover to move its struggling pension plan into a protection fund.

TPR has endorsed a Regulated Apportionment Arrangement (RAA) in relation to the Hoover (1987) Pension Scheme. The purpose of an RAA is to apportion an employer’s share of the debt that would otherwise be due to the plan. According to TPR, RAAs are extremely uncommon, and were introduced into legislation with the expectation that they would rarely be used.

As a result of the RAA, the Hoover employee pension fund will receive a cash lump sum of £60 million ($77.3 million) from the company, which the TPR said “was materially more than the expected outcome on insolvency.” The pension will also transfer into the Pension Protection Fund (PPF). The PPF was created to compensate members of eligible defined benefit pension plans when there is a qualifying insolvency event in relation to the employer, and where there are insufficient assets in the pension to cover PPF levels of compensation.

“This deal led to a better outcome for the scheme than would otherwise have resulted from an uncontrolled insolvency, and maximizes the return for the PPF in very difficult circumstances,” said TPR in a statement. “It has also enabled the employer to continue trading.”

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The Hoover (1987) Pension Scheme has approximately 7,500 members, of which approximately two-thirds are retirees and the remaining third are deferred members. As of March 2016, the pension had a deficit on a buy-out basis of approximately £500 million, and a PPF deficit of approximately £300 million.

In 2015, Hoover approached TPR with a draft application for an RAA to separate the pension plan from the company. At the time, however, they were unable to meet the criteria for TRP approval. TRP said it had not been provided with sufficient evidence that insolvency was inevitable without an RAA. Hoover withdrew the application.

Shortly after, the employer approached the PPF about the possibility of entering into a company voluntary agreement (CVA), where a company can reschedule some or all of its unsecured debts to allow it to trade out its financial difficulties. However, the CVA was rejected by the PPF because, among other reasons, the payment amount offered was insufficient.

Then, earlier this year, Hoover made another RAA proposal, and met with TPR, the trustee, and the PPF to consider whether an RAA had become an appropriate solution, and began negotiations over the next few months. The TPR said expert analysis and advice was provided by Hoover “confirmed that insolvency was inevitable within 12 months,” adding “we concluded that an RAA was an appropriate and reasonable course of action.”

Tags: Hoover, Pension, RAA

UK Regulator Approves Hoover Pension Deal