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From Benedicte Gravrand: How do you deal with the high cost of borrowing and the short selling restrictions in Asia? Simple: get your hedge fund to work in ‘partnership’ with index funds, borrow money from them against a part of the profit, and enjoy readily available capital. And the index funds’ returns are enhanced thanks to their share of the profit. This clever device is used by the Hong Kong-based investment management company EIP (Enhanced Investment Products Limited).

Toby Bland, CIO, CEO, founded the company in 2002 with Russell Davidson. Before that, Toby was head of proprietary trading at Jardine Flemming. He now owns 100% of the company and works closely with Rory McDiarmid, COO, who spent the last 9 years working at Dexia Private Bank in the UK, and before that, 10 years in Hong Kong as a broker. There is a team of 6 now working at EIP. Opalesque talked to Mr. McDiarmid about their overlay model.

It is a two-tier fund structure “There is a series of index funds. The fist index fund was the Taiwan index fund (launched in 2002). We then had India and China index funds in 2005, and in the last few weeks we added Malaysia, Korea, Indonesia, Philippines and Thailand. So we now have eight single-country index funds.”

With a composite fund “And there is a composite fund which we refer to as the Emerging Asia Index fund, which invests in those underlyin......................

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