Senrigan Capital creates side pocket, HSBC Holdings Plc to terminate agreements with smaller Asia hedge fund clients…
SAIF Partners, one of China’s biggest domestic private equity firms with around USD4billion in assets under management, plans to launch a Greater China hedge fund reported Reuters this week. This would make it the first Chinese PE firm to move into the hedge fund space, although the plans are still very much at an early stage.
If and when it launches, the SAIF Partners Greater China Fund will, as seems the perennial norm for so many Asian hedge funds, adopt a long/short equity strategy. Former World Bank economist Andrew Yan, who leads the firm, made no mention of start-up capital or launch date in the marketing document seen by Reuters. SAIF started investing in 2001 and has, to date, invested in more than 100 companies in countries including China, India and South Korea.
HSBC Holdings Plc, one of the industry’s leading hedge fund administrators with USD150billion in AuA, is cancelling agreements with some of its smaller Asian clients to focus on more profitable ones reported Bloomberg News this week. The reason for this is unclear but given the large percentage of hedge funds in the region running modest AUM – certainly compared to Europe and the US – it’s a telling one.
Allard de Jong, group director at Portcullis Fund Administration Pte in Singapore and a former head of Alternative Fund Services at HSBC, was quoted as saying: “From an admin point of view, serving a client that has USD20million in assets would be just as much as serving a client with USD200million – you still have to do the same asset valuations.” One person familiar with the matter said that HSBC was cutting some small clients who are too costly to maintain.
Most of the funds served notices of termination are believed to be running assets of USD50million or less, although some have more than USD100million of assets according to the source. According to Eurekahedge, more than 60 per cent of the roughly 1,300 Asian hedge funds it tracks manage USD50million or less.
This, of course, is good news for other administrators. Apex Fund Services is believed to have been in talks with around a dozen hedge funds leaving HSBC according to Anthony D”Silva, a managing director heading up business development in Asia Pacific. The firm is now in the process of signing up a few of them said D’Silva.
GLG Partners has launched a new long/short equity hedge fund, focusing purely on Asian stocks, with USD150million in seed capital from its parent company, Man Group Plc. David Mercurio heads up GLG’s Asia team in Hong Kong reported AsianInvestor. This is GLG’s first Asia-focused fund and Man’s first discretionary Asian equity fund. The new fund will adopt a market neutral position and look to generate alpha by capitalizing on prices inefficiencies between like-for-like stocks across Asia’s stock markets.
Man Investment’s Asia chief, Tim Peach, told AsianInvestor: “These inefficiencies represent a great opportunity for us to build an Asian long/short strategy, because if you can understand what causes Asian share prices to move…and take advantage of that, you can make money.” GLG Partners will look to commence taking external investor capital in March once it has started to build an initial track record with the seed capital.
Finally, Hong Kong-based Senrigan Capital – the event driven hedge fund managed by former Citadel trader Nick Taylor and backed by Blackstone Group – has moved five portfolio investments into a separate vehicle after heavy losses this year reported Reuters. The fund saw its AUM peak at USD1billion last year. However, this has now fallen by half having lost -8.6 per cent in 2011, and about -15 per cent through September 2012. This has led to some investors asking to redeem their capital.
The five investments in question are to be held separately from the rest of the portfolio in a “special purpose vehicle”; otherwise known as a side pocket. Side pockets basically comprise hard-to-sell illiquid investments. They were the scourge of ‘08 when investors suddenly found they were invested in all manner of exotic, illiquid assets such as mortgage backed securities, and couldn’t, at the time, get all their money back.
Reuters reported that Senrigan told clients about the SPV last month according to sources, and will be paid 6 per cent of their investment into the hedge fund when the fund liquidates the side pocket assets. The investments are believed to be worth USD40million in total.
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