The Hedgeweek Interview: Nick Corby, Fund Advisor and Partner, Bridge Asset Management LLP

HW: What is the background to your company?

NC: Bridge Asset Management LLP (BAM) is a recently launched London-based hedge fund group specialising in the Emerging markets. The founding partners are well known to the hedge fund industry and have extensive experience within the Emerging Markets.

The team has worked together in the past within another Emerging markets hedge fund specialised manager.

The key people are:

• Investment Advisor
  • Nick Corby – Fund Adviser, Partner
  • Gary Cressman – Fund Adviser, Partner
  • Mark Slater – General Counsel, Partner
  • Aelita Arampova – CFA-CEO, Partner

• Investment Manager
  • David Gannon – Executive Director
  • Andrew Beeman – Non Executive Director.

HW:  What are your funds?

NC: Bridge Global Opportunities Fund (BGOF), which launches on 1 November, is the first fund launched by Bridge Asset Management LLP.

The investment philosophy of the fund reflects and plays to the extensive experience of the key investment professionals.

BGOF is not constrained by a geographical approach but it is seeking to take advantage of opportunities within the emerging markets where market inefficiencies, relative illiquidity and weak information flow create value.

BGOF is a Cayman-registered fund. The managerial and advisory arms of the group are pre-funded by the partners for two years, while the fund will be seeded USD 10 million from initial commitments from the partners. The initial response from investors is encouraging.

HW: Who are your service providers?

NC: The fund’s registration and offering documents have been prepared by high calibre firms such as Ashurst in the UK, Dickinson Cruickshank in the Isle of Man, and Walkers in the Cayman Islands. The fund will be audited by KPMG and independently administered by Caledonian in the Isle of Man. Custody services for the fund will be performed by Standard Bank in Jersey.

HW: How and where do you distribute the fund? What is the profile of your current and targeted client base?

NC: The long and successful experience of the team in emerging markets has created its own quite diversified audience of investors which includes clients of private banks, family offices and fund of funds. The flexibility of the fund’s platform and the introduction of Euro class of shares will attract even more investors who were constrained from investing in USD. As a business we will target our own client base. We are focused on all aspects of running a hedge fund business and Aelita Arampova’s primary role is to be responsible for investor relations. We welcome direct contact with investors and as a rule we are not keen to distribute through third parties.

HW: What is the investment process of your fund?

NC: BGOF is opportunistic with a well-defined investment process. BGOF will concentrate its investment within the emerging markets but not exclusively. The core strengths of the investment professionals are their experience in running similar funds, extensive contacts within the emerging markets and a strong deal flow that is outside the normal opportunity set available to most investors.

BGOF employs a bottom-up strategy focusing on asset, quality, cash flow and legal structure.
We are specialists and have an intensive approach and this allows us to create a unique portfolio with low correlations.

HW: How do you generate ideas for your fund?

NC: As mentioned earlier the fund advisors’ main assets are enormous experience, we have traded through many crises within the emerging markets, and have a lot of friends and contacts. We are able to generate a lot of ideas directly from this asset base.

HW: What is your approach to managing risk?

NC: The first way we approach risk is through the quality of the investment process. We try and avoid second guessing the beta component of the market. The first priority is to ensure that each investment is well structured and as conservative and secure as possible. Thus, one of our partners, Mark Slater is a very experienced lawyer. We pay attention to documentation and covenants in extremis they always matter.
Ultimately in a long position we need to ensure our entry price is cheap and underpinned by real and liquid assets. In constructing the portfolio we are seeking low correlation and diversification.

We are also very cognizant of who we are investing with and like our peer group and are more wary of the macro investor whose investment decisions can be based upon unrelated liquidity constraints.

We keep the top down risk management simple, we avoid undue concentration of risk on a geographical and industrial basis.

HW: Has your performance been as per budget and expectations? Do you expect your performance or style to change going forward?

NC: The Partners have fully funded the business and at the moment all is going to plan. Our experience of setting up the business has been good and in particular we have found the regulators FSA in the UK and the FSC of the Isle of Man extremely helpful and supportive. It is too early to say if our style will change. The very nature of BGOF allows it to change style and maximize opportunities between asset classes as they evolve. Experience has shown us to be prompt and flexible.

HW: What opportunities are you looking at right now?

NC: We have a strong deal flow and a great deal of quality investments available to us. The recent market moves have made the environment more appealing for our strategy and we are seeing more opportunities. However we are not going to rush and sacrifice our process. Liquidity reversals can still occur and it pays to be patient and grow slowly.

HW: What events do you expect to see in your sector in the year ahead?

NC: Generally the emerging markets have behaved well during the recent credit crisis. I expect the emerging markets to consolidate this advantage. I expect that investors will continue to focus more and more on the emerging markets as a driver of world growth, it is the major source of value creation. It will not however be a straight line.

HW: How will these changes/future events impact on your own portfolio?

NC: Quite simply I am not convinced that we will not see further dis-locations in the financial markets. More intelligent people than I can figure out what these dis-locations maybe. All I know is that is important for us to do what we do well and to offer a transparent product to our investors. I want to move away from concerns about US treasuries or the S&P and really offer the investment community unique products in frontier markets.

HW: What differentiates you from other managers in your sector?

NC: There are a relatively small number of funds that do what we do and we consider these our friends and our peer group. I would not seek to differentiate myself from them in fact I would rather be included in the same breath as an Ashmore or a Spinnaker. I would however add that there is style drift in some funds moving into the emerging markets chasing yield without sufficient understanding. Politics in the emerging markets always cause an upset and it is important to understand the subjective features. I think it is vital to pick a manager that is dedicated and knows its markets.

HW: Do you have any plans for similar/other product launches in the near future?

NC: This is the first fund and we will concentrate our efforts on this fund as well as building a strong operational platform. In due course when we have a strong base we will launch other products that complement our deal flow.