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QuantCore: Little fund in Big China

Published in Automated Trader Magazine Issue 36 Spring 2015

Martin Lockstrom is a Swedish national operating a quant fund out of Shanghai - a choice he made with his family after falling in love with the country from his days as an academic in the region. Automated Trader talks to him about the opportunities and technical realities of starting a little fund in big China.

Martin Lockstrom, Chairman and CIO, QuantCore Capital Management

Automated Trader: Choosing mainland China wasn't a strategic business decision for you exactly, but the region is certainly interesting to investors. What brought you there?

Martin Lockstrom: I don't have a traditional financial career background. I finished my PhD in 2006 in Germany in the operations research area, heavily influenced by mathematics and physics. I got an offer to continue research at a local university, then afterwards I spent another three years at a business school called China Europe International Business School, which is one of the top business schools in Asia.

In 2012, with a second daughter on the way, my wife and I thought it would be nicer to be closer to home in Sweden. We headed back to Germany where I lived before coming to China and stayed there for about two years, but after realising it was easier to move to China than from China, we moved back in September 2013. Some people say we are crazy, but I usually reply that China is like French cheese: in the beginning you think it stinks and is disgusting, but after acquiring a taste for it, you realise it's a delicacy and you just want to have more.

Our fund often gets this question, is there a strategic investment reason for being in China? Let me put it this way, most companies are well-established but in my case it is the other way around. We are in the very early stage of companies existing here.

A lot of change is taking place. It is a big market, big growth, a lot of capital seeking investment opportunities. So all of these are nice side effects of the fact that I am pretty much already here. It is very interesting to tap into the local market here.

AT: What are the major challenges of operating out of Shanghai?

ML: Our servers are not in China. One thing to mention when you are talking about China, you cannot avoid talking about IP (intellectual property) protection.

Everyone wants to get rich yesterday and employer loyalty is not really the best in the world. There is a high attrition rate, in some professions up to 30% per year.

IP is pretty much the only asset we have. If we can't keep our IP proprietary, what is the edge?

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