Hong Kong-based Sun Hung Kai Financial is seeking to identify investment opportunities within distressed global financial companies with the launch of a recovery fund managed by New Yor
Hong Kong-based Sun Hung Kai Financial is seeking to identify investment opportunities within distressed global financial companies with the launch of a recovery fund managed by New York-based Paulson, a restricted investment scheme open only to professional investors.
Equities globally touched significant lows during a volatile 2008. Financial institutions were among the hardest hit, presenting an attractive backdrop for a long-term ‘recovery-themed’ investment strategy.
During the coming year, SHK Fund Management, the group’s asset management business, anticipates long-term investment opportunities in both public and private companies in the financial sector – specifically undercapitalised banks and financial institutions – focusing on public equity securities; secondary offerings by public companies; private capital raises by public companies and the recapitalisation of failed institutions.
According to recent company filings, investors poured approximately USD60bn into leading financial institutions globally during the second half of 2008. However, during this time, the value of these investments fell by an average of around 25 per cent.
With markets stabilising moderately towards the end of 2008 and investor confidence showing signs of a resurgence as bargain hunters return to the table, Rizal Wijono, managing director, SHK Fund Management, believes now is the time to look at selected investments in the distressed financial sector.
‘Stock selection and timing are absolutely critical when it comes to picking the right financial companies to realise returns for investors,’ he says. ‘The vast majority of these capital injections to date have been too early, particularly with many global financial firms still facing significant writedowns and credit losses, dilutive capital raises and declining corporate earnings.
‘However, there are some golden opportunities in this sector, and we believe that a prudent, long-term investment strategy, if effectively executed, will generate strong returns for investors over the coming years.’
The fund launch builds SHK Fund Management’s relationship with Paulson, which specialises in merger arbitrage, event-driven and distressed investing and has acted as investment manager of a SHK Fund Management corporate arbitrage manager fund since April 2004.