Indian hedge funds fare best globally thanks to PM Modi… Blackstone in talks to back distressed fund…
Hedge funds investing in India have become the world's best performers this year on expectations that Prime Minister Narendra Modi will revive Asia's third- largest economy.
The funds investing in the South Asian nation have returned 26 per cent this year through July, according to Eurekahedge Pte. That compares with an average 3.5 per cent gain for those investing in Asia, 1.9 per cent for Greater China, 1.2 per cent for Japan, 3.8 per cent for North America and 1.1 per cent for Europe, the Singapore-based data provider said.
India-focused hedge funds, with a sixth of the USD16.5 billion in assets of those investing in Japan, are set for the strongest return in five years after Modi secured the nation's largest election victory since 1984 in May. The prime minister has pledged to restore economic growth, rein in inflation and the budget deficit, as well as revive stalled projects to boost investor confidence.
The best-performing hedge fund investing in India in 2014 is the India Insight Value Fund, which returned 78 per cent until the end July, according to data compiled by Eurekahedge. It is followed by The Mayur Hedge Fund, which gained 49 per cent, and the Malabar India Fund LP, which added 48.6 per cent.
Assets under management of India-mandated hedge funds rose almost sevenfold to USD5.3 billion during the three years through the end of 2007 and slumped to USD2.3 billion in the following two years, according to Eurekahedge. They have rebounded to USD2.8 billion as of the end of July. That compares to USD16.5 billion in Japan and USD1.4 trillion in North America.
Blackstone Group LP is in talks to back a Hong Kong-based distressed fund started by Jason Brown, a former global head of Goldman Sachs Group Inc. (GS)’s Special Situations Group, said two people with knowledge of the matter.
Bloomberg reports that Brown’s Arkkan Capital Management Ltd. will focus on Asian opportunities with the flexibility to invest globally, said the people, who asked not to be identified as the information is private. It would be the second time Blackstone backs an Asia-based hedge fund since the 2008 global financial crisis.
Arkkan is seeking the support of the world’s largest manager of alternative investments to stocks and bonds to help it attract other big institutional investors. Blackstone’s backing of Hong Kong-based Senrigan Capital Group Ltd. allowed it to grow assets to more than USD1 billion in less than two years.
New funds in Asia raised an average USD20 million each in the first half, according to Singapore-based data provider Eurekahedge Pte.
Brown ran Goldman Sachs’s global Special Situations Group, which invests in distressed debt and companies using the bank’s own capital, between 2011 and his departure last year. The unit, known as SSG, is part of the investing and lending operations, which generated USD4.3 billion of pretax earnings last year, the most of the New York-based bank’s four business segments.
Brown, a partner based in Hong Kong, had led SSG in Asia from 2007 before his promotion to the global role, according to a memo obtained by Bloomberg News in 2011.
SSG invests in the debt and equity of troubled companies and makes loans to high-risk borrowers. Its investments have included those in Japan’s largest golf course operator Accordia Golf Co. and pizza-chain Sbarro Inc.
Mark McGoldrick, a former global co-head of SSG, in 2008 co-founded New York-based Mount Kellett Capital Management LP, which makes distressed assets, special situations investments worldwide. It oversees USD7 billion of assets, according to its website.
Chris Mikosh, a former SSG managing director, co-founded Tor Investment Management (Hong Kong) Ltd. with Patrik Edsparr, previously a Citadel LLC executive, according to a December 2013 statement from backer Grosvenor Capital Management. Tor invests in credit and special situations across Asia, it said.
The Eurekahedge Distressed Debt Hedge Fund Index returned 4.3 per cent in the first seven months, outperforming the 2.8 per cent gain of the data provider’s global hedge-fund gauge. The strategy returned 16 per cent last year, the best performing of nine strategies, according to Eurekahedge’s website.
The Big Four global accountants are stepping up their services advising hedge funds as they seek to capitalise on a sector mired in increasingly complex and interlinked global regulation.
The Financial Times reports that the increased focus comes as Europe’s Alternative Investment Fund Managers’ Directive, which regulates how hedge funds can distribute their funds, and makes more demands on transparency and disclosure, is being gradually phased in. As a result, accountancy firms have grown from offering fund structuring and auditing of hedge funds to a range of services, according to the chief operating officer at a London hedge fund.
Their activity covers investors, funds, portfolios and managers. Investors need advice on tax and regulatory reporting; activity around funds centres on structuring the legal entity, accounting and auditing; portfolio work involves advice on using instruments such as futures and options, while managers seek advice on location and marketing into different jurisdictions.
Competition among the Big Four to be the leader in this field has intensified. PwC’s hedge fund practice has grown every year since it made it a priority a decade ago, while for the last four years, revenues in EY’s European hedge fund business have grown at a rate of almost 7 per cent a year to over USD100m, according to a person familiar with the situation.
EY now has more than 50 partners focused on hedge funds across Europe, the Middle East and Asia. Last year Fiona Carpenter returned to EY – where she was previously one of its youngest ever partners – to co-lead its tax advisory business for the European asset management industry after a three-year stint at London hedge fund TT International.
Deloitte recruited Chris Farkas, Deutsche Bank’s head of European hedge fund consulting, to join in September as UK hedge funds leader and help expand its 50-strong team specialising in hedge funds.
In May, KPMG cemented its position as the largest auditor of hedge funds based on client numbers when it acquired the New Jersey-based professional services firm Rothstein Kass. Two months earlier KPMG’s global head of hedge funds Rob Mirsky relocated to New York from London and the firm promoted Dan Roman to head up KPMG’s UK hedge funds practice.
The firms say having a global practice to service hedge funds is key, because while the hedge fund management company may be based in London or New York, the funds tend to be domiciled in offshore jurisdictions such as the Cayman Islands, Delaware, Luxembourg or Dublin.
With the hedge fund industry predicted to grow from USD2.6tn to USD3tn during 2014, according to Deutsche Bank prime brokerage’s annual investor survey, accountancy firms can see the raft of global regulations that hedge funds are facing.
UBS Wealth Management has placed a hedge-fund distribution specialist at the helm of its whole Asia-Pacific distribution effort.
Paul Stefansson was named head of investment fund distribution for the region, Citywire Asia reports. He succeeds René Buehlmann, who was named Asia head of UBS Global Asset Management last month.
Stefanson had been a managing director for investment and hedge fund distribution at the firm, which he joined in 2006. He will remain based in Singapore in his new role.