Signet Group, the USD1.7billion fund of hedge funds, is in the process of designing a portfolio to invest in Asia-based fund managers involved in private lending, particularly those targetin
Signet Group, the USD1.7billion fund of hedge funds, is in the process of designing a portfolio to invest in Asia-based fund managers involved in private lending, particularly those targeting Indonesian companies, reports AsianInvestor this week. Prior to 2008, the private lending space was well populated, especially with investment banks keen to secure high liquidity premiums, but this credit soon disappeared at the height of the financial crisis. Signet’s founder and chairman, Robert Marquardt (pictured), now sees pricing returning to the market, commenting that hedge funds are once again “earning attractive credit premiums for lending to small-cap or lower-credit companies”. Speaking to Hedgeweek from Lausanne, Marquardt said that private lending was economically sensitive: “You want somewhere where it’ll support you and that’s Asia. If you’re willing to make corporate loans there are a lot good companies to choose from – fund managers can get eight to 15 per cent net rates with IRRs in excess of 20 per cent.”
With that in mind, Signet is now building private lending funds for its clients (mostly pension funds) who, amidst a backdrop of globally flat interest rates, are looking to push out liquidity. This won’t, however, be a simple FoF. “Each client will have a bespoke fund,” confirmed Marquardt, adding that he expected the first to launch in Q1 2011. Over the last five or more years, Signet has built relationships with between five and 11 managers in its emerging market and credit funds, many of whom have significant experience in private lending; a very difficult space to get into. “It’s built on long relationships with managers so I don’t think there’ll be a lot of new competition,” explained Marquardt. Post ’08 there hasn’t been a lot of specialist credit to support small Asian companies, but Marquardt believes Asian fund managers are well suited: “They’re very professional credit managers, they’re good at structuring loans, at perfecting collateral, and they tend not to be leveraged,” said Marquardt. Jurisdictions being considered include Greater China and SE Asia, (and Indonesia, where Signet’s managers know the principals of Indonesian companies), where rule of law must be solid and the debt is both senior and securitized. The loans involved will typically run for one to four years, to be used for such purposes as project financing.
