Hedge fund services specialist KE Absolute is launching a fund dedicated to investing in Asian hedge funds at the early stage of their investment cycle.
The fund, which will officially launch on 3 May 2004, will be seeded by proprietary capital from KE Investments, a subsidiary of Kim Eng Holdings, the Singapore-based securities broking and investment management firm. The fund will ultimately be opened to third party investors.
KE Absolute Managing Director Tom Ashworth said: "There is a clear niche in the Asian market for this product. Traditional fund of funds typically have stringent requirements before making investments in hedge funds, one of them being a minimum track record of at least 12 to 24 months. However industry analysis points to superior absolute returns by hedge funds in the first two years of their investment cycle, when fund size is still low and managers are at their most driven to perform."
"The difficulty most fund of funds encounter when selecting younger hedge funds is that the due diligence process is often more qualitative than quantitative due to the limited performance history of the managers. We are in a unique position in that we know the Asian hedge fund community very well and many potential investees are our clients, giving us first hand knowledge of their trading approach and investment styles."
"Most of these managers have a track record of success working and investing at other, generally larger institutions before starting out on their own. So while they have the experience of successfully generating returns in the region, their early stage status precludes many investors from accessing this strong performance," says Ashworth.
Unlike seed capital funds where strategic capital commitments are made often in return for a percentage of the management company, the fund will invest in hedge funds which are already past the inception stage.
Ashworth said: "We are seeking managers who have raised sufficient capital to launch and have established their infrastructure. This reduces the operational risk that exists for all funds prior to commencing operations."
Fifteen funds have already been identified for potential investment. It is intended that investments will normally be restricted to 20% of the total fund size.
Fund selection will be determined based on recommendations by KE Absolute, and are subject to approval by Kim Eng's internal investment committees and processes. The fund will invest in a range of strategies with manager locations around the globe, although it is likely there will be a slight bias towards managers actually based in Asia, particularly Hong Kong and Singapore.
Ronald Ooi, Managing Director of Kim Eng Holdings said, "It was always our intention to broaden our suite of products and services for the rapidly expanding Asian hedge fund industry. This initiative complements our existing services and simultaneously achieves two objectives, it works towards achieving a higher return on capital for the Kim Eng Group while reinforcing and broadening our focused services and client relationships in the Asian hedge fund sector."
Background Note: KE Absolute™ is an independent unit of Kim Eng Securities specialising in servicing Asian hedge funds. It provides a range of dedicated services including alternative investment strategies, idea-driven sales, capital introduction and order management technology.
Service coverage includes both equity and derivative products and spans all Asian markets, including Japan. Execution services for the United States markets are also offered for Asian-based clients.
Through its association with Kim Eng Holdings, Asia's leading independent securities brokers, KE Absolute also offers clients a strong on-the-ground presence in all significant Asian markets.