Marco Polo launching second China hedge fund

HONG KONG, April 2 (Reuters) - Marco Polo Pure Asset Management is launching its second China-focused hedge fund, which will allow it to invest outside of the mainland Chinese market where it earned triple-digit returns in 2006 and 2007.

The Marco Polo Pure Pan-China Master Fund will begin investing on April 3 with about $20 million in assets, Marco Polo Chief Executive Aaron Boesky told Reuters on Wednesday.

The firm has commitments for an additional $20 million in investments starting May 1 and aims to reach $50 million in assets by June 1, he added.

The fund will have the flexibility to invest in Hong Kong-listed H-shares and other China-related securities trading overseas, as well as in China's domestic A-share market.

The company's flagship Marco Polo Pure China Fund, which had $170 million in assets under management at the end of February, is focused entirely on the mainland A-share market.

Launched in September 2004, it lost money that year and the next before rising more than 105 percent in 2006 and 133 percent in 2007. It fell 2.72 percent in the first two months of this year, compared with a more than 17 percent decline in the Shanghai Composite Index .SSEC.

"The strategy of the new fund is to go after ideas that we see from our normal course of research in the A-share market," Boesky said.

These include relative value opportunities, Chinese government policy-driven opportunities, arbitrage opportunities, and special and event-driven situations.

He said the firm's "eyeballs in the Shanghai market" would give it an advantage when investing in overseas-listed Chinese stocks.

Boesky said the new long/short equity hedge fund was expected to launch with about 20 percent of its assets in the A-share market, but it had the flexibility to raise or lower that to any level. (Reporting by Jeffrey Hodgson; Editing by Edmund Klamann)