ABN AMRO Asset Management (AAAM) is launching the ABN AMRO Emerging Markets Debt Hedge Fund managed by Raphael Kassin.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Whilst AAAM already manages over USD 600 million in fund of hedge funds products, this is the first single manager hedge fund product to be managed by the Group.
Gary Vaughan-Smith, Head of Alternative Investments at AAAM, said: "We are very excited about this, our first single manager hedge fund launch. The Emerging Markets Debt team's absolute return orientation and clear skill set in this asset class make them an obvious choice to manage our first, single manager hedge fund. We are backing the team with our own money - we will be investing USD 20 million of proprietary capital into the fund."
The new Cayman-domiciled fund launches at the end of April and is expected to be listed in Dublin. Minimum investment is USD 100,000 and expected capacity is USD 200 million.
AAAM currently manages assets of USD 1.3 billion in emerging markets. The new fund will be managed by an award-winning investment team, based in London and led by Raphael Kassin.
Kassin is a senior portfolio manager within the ABN AMRO Asset Management global fixed income team and manages the top-performing ABN AMRO Global Emerging Markets Bond Fund. He has delivered annualised returns of 23.5% since July 1998, ahead of the benchmark return of 11.4%. This fund has consistently out-performed its benchmark in every calendar year since inception.
Since 1989 Kassin has worked at Sakura Bank, as a trader managing positions up to USD 10 billion, at Chemical Bank, where he helped build the legal framework for trading and transferring Emerging Markets loans, and at ABN AMRO Bank's Emerging Markets Group in the Bank's wholesale division.
AAAM stated that the team has managed this portfolio on an absolute return basis, so the move to a hedge fund format is a natural step to take. Kassin has extensive experience on both the long and short side of emerging markets trading.
The new fund has a target annual return of 15%, with 8-12% target volatility, and will start investing at the end of April 2004.
The strategy will focus on event-driven trading in liquid, hard currency sovereign debt in the emerging markets. The fund will take long positions in countries where future events are likely to lead to appreciation, and short positions in those countries seen as most likely to be adversely impacted by economic, political and social events.
In managing the fund, Kassin will be supported by a global network of investment professionals within AAAM, enabling him to react quickly to such developments. This network includes a team of local debt analysts in emerging markets, a global credit team and the AAAM Emerging Markets equity team.
The fund will employ a three-stage investment process, combining fundamental, technical and market timing techniques:
1. Create potential trading ideas, using macro-economic analysis and AAAM's extensive global network of local portfolio managers and market analysts
2. Identify key events or catalysts around which trades can be constructed
3. Construct the portfolio and size the position.
Investing in Emerging Market Debt
Emerging markets debt has outperformed traditional asset classes since 1990, and this strong performance has been delivered despite a series of crises, including the Russian and Argentinian defaults (in 1998 and 2001 respectively) and the 1994 Mexican Peso crisis. This series of crises is a feature of emerging markets debt investing and provides excellent trading opportunities for skilled managers.
Kassin said: "Our focus is on generating positive returns by trading around major events in Emerging Markets. In our world, timing and the ability to anticipate such events are everything, and this makes AAAM's wide network of local emerging markets debt analysts absolutely invaluable."
"We have enjoyed a great deal of success to date in trading around important events. In Brazil, we exited all our positions in Brazilian bonds in the Spring of 2002 in anticipation of the Brazilian election in October. Polls at that time were indicating that Lula was likely to get elected."
"We watched the benchmark bond price fall from around 80 to under 50 by October. At that point, we felt that the market was over-reacting to the risks and we bought at that level. Announcements after Lula's win confirmed his investor friendly attitude and the benchmark bond rose steadily from that point to over 100 by late 2003."
"We are never neutral on any one country. We're paid to make decisions and we therefore either like a country, or we don't. At the moment I have my eye on Venezuela, whereas markets like Russia and Brazil, where Governments are getting to grips with their economy, are becoming perhaps a little too expensive."Background Note: ABN AMRO Asset Management (AAAM) is the separately organised investment unit of ABN AMRO Bank N.V. AAAM is headquartered in London and Amsterdam with other main money management units in Chicago, Atlanta, Hong Kong and Singapore. It has significant experience in managing money for over 2,000 institutional clients, such as central banks, pension funds and insurance companies. Besides this, AAAM manages money for thousands of private clients around the globe. It employs over 2,000 people worldwide in over 20 countries, with portfolio managers and analysts located around the world. AAAM manages EUR 156 billion (as at 31 December 2003) in segregated accounts and in over 500 mutual funds.