Hong Kong-based boutique investment manager Adept Capital Partners has launched a fund of early stage Asia hedge funds that aims to capture the superior absolute returns typically generate
Hong Kong-based boutique investment manager Adept Capital Partners has launched a fund of early stage Asia hedge funds that aims to capture the superior absolute returns typically generated by dynamic hedge fund managers in the early years of their life cycle.
The fund builds on the principals’ three-year track record managing a similar early stage fund and draws on Adept Capital’s extensive network and proprietary analytics, which the firm says are key to identifying and monitoring promising Asia-focused hedge funds.
The fund will target an annualised-risk adjusted return of between 15 and 20 per cent and will invest in up to 20 Asia-focused hedge funds that have been operating for three years or less with no more than USD250m in assets under management.
Following extensive quantitative and qualitative assessment of more than 600 early-stage funds operating in Asian markets, Adept Capital has identified 15 hedge funds that meet its key investment criteria. The fund is aimed solely at professional investors and its niche strategy means the target for assets under management is limited to USD150m.
‘The evidence is clear that young hedge funds outperform more mature ones by a significant margin,’ says Adept Capital chief executive Eleni Istavridis. ‘The fund strives to identify high-quality managers who deliver superior absolute returns.
‘The assessment and due diligence process to identify attractive early-stage funds is intensive and not easy to replicate. Our approach offers investors access to a highly focused and risk-managed vehicle they might otherwise not be able to participate in.
‘Asian markets are increasingly attractive for investors seeking absolute returns, with growing liquidity and sophistication, yet they are still relatively immature and present good opportunities for absolute investment strategies. Our fund offers the best of both worlds – access to dynamic young managers and to Asia, the world’s most compelling growth story.’
The Early Stage Asia Fund will be managed by Adept Capital’s chief investment officer Tony Smith, supported by a team of eight professionals. Smith has more than 15 years experience in the investment management industry and was previously responsible for managing a private early-stage fund of hedge funds at KE Absolute.
‘Early-stage managers have an intense drive to succeed,’ he says. ‘They focus more on performance than growing assets and they tend to have fresh ideas. These are also by nature the smaller funds that can selectively invest in the best opportunities and execute in a nimble and anonymous way.’
Adept Capital’s investment methodology is complemented by proprietary analytics designed to lower volatility and a business framework involving robust investment discipline, active monitoring of underlying investments and regular reporting to investors.
‘We are at the forefront of unearthing very exciting early stage managers focused on Asia,’ Smith says. ‘Relationships are key. With more than 60 years’ combined experience in the financial markets and an established network of contacts, Adept Capital is well placed to add value.
‘Most funds of funds have rigid requirements on size, established track record and longevity that preclude the selection of many strongly performing early-stage managers. Yet many of the principals of early-stage Asian hedge funds have achieved success in previous roles and are well positioned to deliver superior results.
‘The focus on early-stage investments has the added benefits of giving privileged access to these high-quality managers and further opportunities as they grow or introduce new products.’
