Hillhouse Capital Management has filed an amended 13D form disclosing the increase of the fund’s position in Qunar Cayman Islands Limited (NASDAQ:QUNR) to 20.24 million Class B ordinary shares. Precisely, the hedge fund run by Lei Zhang purchased 14.52 million additional shares in Qunar, with the total position now accounting for 12.99% of the company’s outstanding common stock. Moreover, Hillhouse Capital Management disclosed that the purpose of the transaction and its interest in the company is purely related to the expected appreciation in the price of the purchased securities, which they have been very good at this year.
Professional investors like Lei Zhang spend considerable time and money conducting due diligence on each company they invest in, which makes them the perfect investors to emulate. However, we also know that the returns of hedge funds on the whole have not been good for several years, underperforming the market. We analyzed the historical stock picks of these investors and our research revealed that the small-cap picks of these funds performed far better than their large-cap picks, which is where most of their money is invested and why their performances as a whole have been poor. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic the best ideas of the best fund managers on your own? A portfolio consisting of the 15 most popular small-cap stock picks among the funds we track has returned more than 142% and beaten the market by more than 84 percentage points since the end of August 2012, and by 4.6 percentage points in the first quarter of this year (see the details).
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Hillhouse Capital Management is a Beijing-based hedge fund founded by its current chairman and portfolio manager, Lei Zhang. This leading investment management firm was initially financed with $20 million in seed capital from the Yale Endowment in 2005. The hedge fund employs a long-term fundamental investing approach and focuses mainly on the consumer, TMT (i.e. Telecommunications, Media and Technology), industrials and healthcare sectors. Furthermore, Lei Zhang’s Hillhouse Capital Management has delivered annualized compound returns of 52% since its inception, despite a slump of 37% in 2008. Hillhouse Capital is also one of the world’s largest hedge funds and it is not strictly a local fund in spite of its Asian location. According to the most up-to-date 13F filing, Lei Zhang and his team of investment professionals at Hillhouse Capital manage a U.S public equity portfolio worth $5.48 billion, though many of those holdings are in U.S-listed, Chinese companies. One of those is JD.com Inc. (NASDAQ:JD), while the firm also has a position in U.S snack food company Mondelez International Inc. (NASDAQ:MDLZ), among other holdings.
Qunar is one of the leading Chinese online travel information providers and search engines for web-based and mobile users. The company’s goal is to assist travelers in making appropriate choices when it comes to choosing flights, hotels, and other travel-related issues. The stock has increased by an enormous 70% year-to-date and it does not seem that the increase will halt soon as the company has recently raised additional capital through its public offering of 6.53 million American Depositary Shares (ADSs) for acquiring businesses, products, services or technologies. Each ADR was priced at $47.50 per security and represents three Class B ordinary shares. Moreover, the company issued extra greenshoe options that will allow underwriters to purchase up to 315,790 additional ADSs. Unquestionably, Qunar is seeking new growth opportunities; therefore, the capital raised will allow the company to benefit from any potential strategic opportunities that come along. The future outlook of Qunar looks quite bright despite the fact that the company has not yet engaged in any discussions for specific acquisitions.
