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Kerrisdale Capital: How do people react these days if a hedge fund is up 200% in a year?

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Published on Jun 18, 2012

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Sahm Adrangi is the founder and CIO of Kerrisdale Capital Management, a value-oriented and special situations fund based in New York. Mr. Adrangi is a leading expert on Chinese stock scams and has shared in-depth research with the investment community on fraudulent U.S.-listed Chinese companies.

It's not only Sino-Forest

Beginning in 2004 and particularly from 2006-2009, more than 400 Chinese companies went public in the U.S. through reverse mergers, avoiding the costs and rigorous due diligence involved with registering in the mainland or Hong Kong.

Throughout 2010 and 2011, many U.S.-listed Chinese reverse mergers were exposed as frauds, leading to stock halts, auditor resignations and a general decline in the sector. Red flags at U.S.-listed Chinese companies include inflated margins, low-quality auditors, high CFO and auditor turnover, sham acquisitions, related party transactions, etc.

Kerrisdale published research reports on numerous frauds, and benefited as the Bloomberg Chinese Reverse Merger Index (a proxy for this group) fell more than 60% during 2011. Since inception in July 2009, Kerrisdale Partners LP has been ranked among the top performing hedge funds, making most of its money on the opportunistic book and on the short side.

Learn from Sahm in this fascinating Opalesque.TV BACKSTAGE interview how brazen fraudsters recklessly set up phony firms and produce false reports. However, such stock scams can also occur in non-Chinese companies, particularly in sectors that lend themselves to "stories", such as tech, biotech, metals & mining, oil & gas, etc.

Prior to founding Karrisdale Capital Management, Sahm Adrangi was an investment analyst at Longacre Fund Management where he was doing investment research both on Longacre's flagship distressed debt credit fund and an equity fund. Prior to Longacre, Mr. Adrangi worked in the bankruptcy restructuring group at Chanin Capital Partners. Prior to Chanin, he worked in the leveraged finance investment banking group of Deutsche Bank.

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