K2’s Asian strategy

K2 Asset Management was established in July 1999 by former Hong Kong-basedHSBC Asset Managementdirector, Mark Newman and formerBTexecutive vice-president, Campbell Neal. Melbourne-basedK2is a boutique long/short hedge fund manager and has two flagship funds — the K2 Australian Absolute Return Fund and the K2 Asian Absolute Return Fund.

The Australian strategy has $75 million in assets while the Asian strategy has $130 million, however these figures include monies managed on behalf of overseas investors as each strategy has an Australian domiciled fund and a Cayman Islands domiciled fund.

According to senior portfolio manager, Robert Hand, the Asian fund is likely to reap a performance boost courtesy of assets flowing into the region’s stock markets.

“With strong allocations continuing to be made into Asian equities we can expect to benefit from expanding PE (price to earnings) multiples,” Hand says.

As a result K2 is bullish in terms of the net long bias within the fund as the strong inflows into Asian markets are unlikely to see too many companies suffering on the down side, Hand says.

As for the Australian fund, Hand says with domestic stocks trading at an average PE of around 15 times earnings and given his belief significant value is unlikely to be found among the majority of domestic large caps, the fund is set to provide steady returns this year while its Asian sibling has improving economic fundamentals favouring its markets in terms of outperformance this year.