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Ex-Deutsche Bank’s Gregory Park to open hybrid Asia hedge fund

December 3, 2010
- 1:18 am

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Former head of securitized products at Deutsche Bank AG, Gregory Park, is to launch a hedge fund in Hong Kong to tap into the region’s burgeoning consumer-driven demand.

Former head of securitized products at Deutsche Bank AG, Gregory Park, is to launch a hedge fund in Hong Kong to tap into the region’s burgeoning consumer-driven demand. Asia’s middle classes continue to grow, particularly in the BRIC economies of China and India, meaning the levels of disposable income and demand for consumer credit are correspondingly on the rise. Park’s fund – the Northstone Peak Capital Asia Credit Opportunity Fund – will finance consumer finance and other consumer-related companies such as automobile finance companies and cinema operators by mostly buying bonds including convertibles and warrants. The fund, which hopes to raise USD250million within the first six months and eventually reach USD2billion by attracting institutional tickets and HNW allocations, is not your typical traditional hedge fund but more of a “hybrid” hedge and private equity fund.

With a three-year life, the fund is being launched at a time when the implications of Basel III are already causing banks to tighten their balance sheets. Consequently, traditional bank credit channels are being cut off to consumer finance companies who, because they cannot accept deposits, are finding it hard to meet consumer demand and grow. Recently approved, Basel III means global banks now have to conform to much stricter capital requirements. Minimum bank capital ratios will be 7 per cent – this includes Tier 1 capital doubling from 2 per cent to 4.5 per cent, in addition to a capital conservation buffer of 2.5 per cent by 2019. And it’s plugging this hole, by servicing the consumer-focused finance firms, that Park hopes will drive the fund’s performance. “With the introduction of Basel III, banks will become even more selective in lending just as the region’s most exciting companies demand growth capital,” Park was quoted as saying. The Northstone Peak fund will make 20 to 25 investments and aim to return 15 per cent to 25 per cent annually less fees. Potential deals include mezzanine loans secured with underlying auto loan pools in China and bonds/warrants sold by Chinese fleet rental companies within two years of going public.

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