UPDATE 1-Former HK prof, ex-Polaris exec plan China hedge fund
HONG KONG Nov 11 (Reuters) - Hong Kong-based Rega Technologies plans to launch a China-focused long/short equities hedge fund in January with about $40 million in initial capital from partners, friends and family, its Managing Director Kin-Leung Chan said.
The firm, founded by a former Hong Kong Polytechnic University's assistant professor of finance Dr Jie Zhang and Gang Fu, who worked at Hong Kong-based Vision Investment, received a licence from the market regulator last week.
It is now in talks with institutions in China and Singapore and those in Europe and the United States to raise funds, said Chan, a former investment director of the asset management arm of Polaris Securities (HK) Ltd who joined Rega earlier in 2011.
Rega will mainly trade stocks listed on the Hong Kong exchange and has a capacity to take in $1 billion.
The fund will also trade China A shares using the QFII quota of its prime broker, Goldman Sachs, Chan said referring to a licence which allows foreign investors to buy domestic Chinese stocks.
The fund's launch comes at a time when investors are shying away from allocating fresh capital to Asian hedge funds as a lingering debt crisis in Europe and sluggish growth in the United States keep them on sidelines.
The fund is aiming for a slice of a market which is chased by some 150 China focused hedge funds managing about $14 billion between them, according to data from industry tracker Eurekahedge.
"We know how to short," said Chan, who has 17 years of trading experience.
"We can use short book to generate alpha - instead of most other peers only using futures or options to hedge," Chan, who also worked as a portfolio manager at Quam Asset Management.
Both Dr Zhang, whose research interest includes equities, derivatives and liquidity, and Gang Fu, who also worked at McKinsey, have more than a decade of trading experience each.
Rega has also roped in Jie Gan, a professor of finance at Cheung Kong Graduate School of Business and Xin Chang, an associate professor of finance at Nanyang Technological University, Singapore, as directors.
The fund will mainly focus on undervalued stocks screened by its in-house quantitative models which evaluate financial statement consistencies among others, Chan said.