Updates

Asiahedge 05-2005

ASIAHEDGE MAY 2005 ISSUE
PERFORMANCE
QAM ASIAN EQUITIES FUND

Quant Asset Management’s QAM Asian Equities Fund had a good April, finishing up 5% in what was a difficult month for Asian equities. Year-to-date the fund is up 15.45% and it has put on 33% since inception in April 2004.

The fund consistently holds 50 stocks and employs a pure dynamic quant strategy using models based on 25-30 factors mainly related to either relative valuation or earnings expectations including factors like consensus earnings momentum, earnings revisions, price momentum, price/earnings ratios and dividend yields. The fund uses futures for its hedging and had hedged long stock positions with a 100% Asian benchmark hedge. The latter prevented the fund incurring any negative contribution from the market in April, according to QAM’s Frank Holle.

The fund was more heavily weighted towards valuation factors and away from momentum factors in April. It was concentrated in three major markets in April- holdings in Japan accounted for 28% of the total whilst Korea and China took up 27% and 18% of the total respectively. The top three holdings were in steel (25%), chemicals (20%) and oil (10%).

Looking ahead, Holle points out that the model only has an outlook for the period of 3-6 weeks since it portfolio of stocks changes regularly . Consensus earnings forecasts based on the views of 50,000 analysts worldwide continue to be neutral to negative for Asia and in May the fund is weighted towards steel, commodities and oil, sectors where the models see good relative valuations and positive earnings growth and momentum.

QAM has currently has $18 million in assets under management of which US$ 7 mln in the QAM Asian Equities Fund which has a capacity of $150 million.

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