Asia Long Only Fund
The Fund
An investment partnership with offices in San Francisco and an active research and trading presence in Hong Kong. The co-CIO runs the fund’s business in Hong Kong, managing a team of in-house research analysts and implementing the team’s investment conclusions.
How do you perceive CF Global?
CF is our dealing desk. We treat their trader as our trader, as part of our team. For example, in our half-yearly review on brokers’ performance, he provides inputs on broker execution quality and initiatives on a set of factors including access to block liquidity. We combine these inputs with our votes from analysts and PMs to form the final ranking.
How did you execute in the past?
Before we hired a trader, we spent 30% of our time tracking flows and blocks that we are interested in, and then managing that execution so we don’t show our hands to the executing brokers. Trading involves a standard of market intelligence that we had to do ourselves and this meant lots of talking with the Street.
The flow and blocks information has a short shelf life – act today, or it’s gone tomorrow. As we got more involved in idea selection, I chose to spend time on things that have a long longer shelf life like learning about competitive dynamics in an industry or understanding the competitive advantage of a product or division of a company.
When I give an order to the sell side, I rarely give the full picture of what I’m trying to do. If you show your full size, you risk having a larger market impact. From experience, there is ‘chatter’ on flows. Today, CF manages this for us so we don’t show full hand to the Street.
Why CF Global?
We first traded ourselves, and then hired an in-house dealer. We have a concentrated portfolio and low turnover. We need high level of skills but have low utilization. We decided to use CF Global after an approach by (co-founder) Robert Fleming.
Any concerns?
I was initially skeptical at first about that extension of trust to an outside party. Over time, the team at CF have earned our trust. Now, we have full transparency with CF Global on what we’re trying to do to manage trades and axes on our behalf.
Does it matter that the traders aren’t sitting in your office?
Not really. In the old days, trading was more voice based so listening in the dialogue for flows was helpful. Now, our CF trader keeps us posted via Bloomberg messenger and order management system. He calls only occasionally, for example with a block. We have developed an escalation system so that we don’t call each other daily. We give him an idea of how we want a trade executed rather than trying to hand-hold him or micro-manage his execution.