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SINGAPORE (BLOOMBERG) – Long before he ran the world’s best-performing hedge fund, Qian Yong Qiang was head of China’s largest online dating service.
The Yale graduate would spend hours tracking down attractive users with suspicious profiles, checking accounts, and eliminating thousands of scammers to improve the site’s authenticity and ensure its success.
You are now betting that the same attention to detail and strong returns will help turn your Singapore-incorporated company into a wealth management giant. Between January and September, QQQ Capital Management posted gains of 275%, making it the world’s largest hedge fund, according to Eurekahedge data.
QQQ says assets under management increased to about $ 1 billion (S $ 1.36 billion) last month, with most of the money coming from Qian.
The gains have come with concentration risks that many fund managers would resist: QQQ has more than a third of its assets invested in Chinese education companies. While those stocks had skyrocketed this year, they have been hit by concerns about regulatory crackdown and allegations of accounting fraud, with one plummeting in recent weeks amid downgrades from analysts.
“When we invest, we know everything about an industry, its top five people, its personality, its weakness, its greatness, everything about them,” Qian said in an interview.
Cultural revolution
Mr. Qian’s experience with the Chinese educational system is profound. Born in 1972, the same year that United States President Richard Nixon visited China, Qian grew up amid the rapid economic growth that followed the Cultural Revolution. After graduating from North China University of Technology, he joined a teaching center, specializing in helping students prepare for universities abroad. He then made the leap himself, earning an MBA from the Yale School of Management in 2000, where he now sits on its Greater China Board of Advisors.
After returning to China, Mr. Qian was persuaded to return to the school and became a co-founder as he expanded. It later became the New Oriental Education & Technology Group, a behemoth in space with a market capitalization of nearly $ 26 billion on the New York Stock Exchange.
After leaving New Oriental, he helped build and sell mobile content provider Atop Century and bought a substantial stake in online dating service Jiayuan.com. But as Beijing’s haze worsened and her children developed asthma, she moved to Singapore in 2013.
“I wanted to start an Internet company in Singapore, but it wasn’t feasible because you couldn’t find enough tech talented people,” he said. “So the only thing to do was the financial industry.”
After five years running his own account, the 48-year-old Qian turned pro in 2018, seeding QQQ with $ 100 million of his own money. That year, the fund yielded nearly 40 percent even though it was only in operation for three-quarters. In 2019 it gained 31%, beating the S&P 500 index in both years. Singapore granted the fund an upgraded license in August, eliminating an asset limit of $ 250 million.
Botanical Gardens
QQQ is almost exclusively traded in stocks traded in the United States, so Qian gets up at noon and eats before working out at the Singapore Botanic Gardens. The rest of the day is spent catching up with friends and family before starting work at 8 p.m., 90 minutes before the New York market opens. For the next eight hours, he lives online, absorbing company news and reports while tracking social media and trading stocks.
Like other hedge funds, his team of six does a lot of alternative data analysis. They frequently trade Tesla stock, so he checks satellite images of car lots and shipping manifests. QQQ also makes people attend after-school tutoring classes in China to measure attendance, and buys calls and places indexes to help hedge tail risk. Mr. Qian also uses his contacts and alumni for their views on business.
Qian says his advantage is the business experience of managing companies, adding that each business that QQQ bets on represents thousands of hours of research, giving it the confidence to place massive bets on select areas. He currently has about 55 percent of assets in cash before the US election, betting that stimulus negotiations would fail and shake markets. The S&P 500 fell in four of five sessions last week, hitting a five-week low.
Counterfeit sales
Concentrated calls have paid off so far. Over the past year, New Oriental Education has risen 31%, while GSX Techedu Inc has almost quadrupled and TAL Education Group is up 55%.
“In large part, the outperformance could be attributed to good stock selection in the education and technology space,” Eurekahedge chief analyst Mohammad Hassan said in an email, noting that the fund has underperformed. 444% since June 2019. So far this year, the Eurekahedge Long Short Equities Hedge Fund Index is up 4.7%.
Gambling carries many risks. TAL in April admitted that an employee may have falsified sales contracts. GSX announced last month that it was under investigation by the US Securities and Exchange Commission Regulators required financial records dating back to 2017 following reports from short sellers, including Muddy Waters. When Credit Suisse Group, one of the banks that went public with GSX last year, downgraded the company to sell it on Oct. 21, the shares tumbled 31 percent. The recent drops could knock QQQ down from the number one spot among hedge funds.
“Diversification can go both ways – if you’re right in your investment thesis, you could potentially make a lot of money, but if you’re wrong, there’s a big downside,” said Melvyn Teo, a finance professor at the Singapore Management University. Concentration may also deter frontline investors from QQQ funds as they tend to prefer more diversification, added Professor Teo.
A QQQ spokesperson said there had been a “small drawdown” recently, but the fund’s positions were hedged and it was still doing well.
Qian declined to comment on the claims against the education companies, though he said he trusts many of the key leaders and understands the fundamentals. QQQ is open with clients about risks, sometimes rejecting money from investors who feel they cannot handle potential losses.
“I haven’t given my team any fundraising goals, we only have two and a half years and track record is the most important thing,” he said.
Beyond that, he’s not afraid to set lofty goals: “We want to be the largest wealth management firm in the world,” he said.
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