David Yein, a former trader with Boston-based global long/short equity shop Delta Partners, on March 15 launched the Abacus Greater China Focus Fund, a China-focused long/short fund.
Accroding to Yein, the hedge fund is opportunistic and has very focused positions, most of which are not directly traded in the Chinese market but are either ADRs or shares listed in Hong Kong, Taiwan or Singapore. “When we get big enough, we’ll apply for QFII [qualified foreign institutional investor] to trade directly in the Shanghai Exchange,” said Yein, whose fund currently manages about $1.2 million.
Yein believes his ability to speak the language gives him a leg up. “Because I speak the language and have lived in Taiwan, I have a first-hand feel on these Chinese companies,” he said. “I actually go and try to visit these companies because it’s still a third-world country and there is plenty of fraud so there is plenty of opportunities to go long and short.”
For example, Yien said he recently shorted a Chinese company called Bodisen Biotech, which is listed on the American Stock Exchange as well as in London and Frankfurt. “Most people in China are still trying to feed themselves and they’re selling organic fertilizers. Are they telling us there is a market for organic foods in China?”
After raising significant capital, the company spent the money on buying another Chinese company called China Natural Gas. “They said natural gas was required during the production process for organic fertilizers but organic fertilizers actually produce natural gas,” Yien said.
The Abacus Fund charges fees of 2% for management and 20% for performance, with a $50,000 minimum investment requirement.