Singapore Hedge Fund

Alternative asset management in Singapore

New Asia-focused team at FrontPoint

FrontPoint Partners hired a new Asia-focused event-driven and special situations hedge fund investment team, led by portfolio manager John Foo.

The Singapore-based team all came from Kingsmead Capital Advisors, which Mr. Foo founded.

Joining him is Edgar Chia, analyst, and Hubert Yong, trader; they held similar positions at Kingsmead Capital, according to a FrontPoint news release.

Kingsmead Capital liquidated its similarly managed Asian hedge fund in July 2008, said Erica Platt, a spokeswoman for FrontPoint’s parent, Morgan Stanley Investment Management.

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Singapore-based Asia Genesis to Close Hedge Funds

From Bloomberg, news that Singapore-based Asia Genesis, whose Japan Macro Fund has outperformed its peers, is to close its hedge funds and returning money to investors.

“I need some time to recuperate from weak health,” founder Chua Soon Hock, 50, said in an e-mailed reply to queries from Bloomberg News. “In past years, I have been doing 18-hour workdays with very active positions’ management to keep downside volatility of funds very low. I cannot do that with my current health conditions.”

The Singapore-based hedge-fund firm will return all money invested in the $761 million Japan Macro Fund and $12 million in the Asia Genesis Equity Fund to investors by mid-September, Chua said on Aug. 14.

The Japan Macro Fund returned 24 percent in yen terms in the first seven months of the year. Asia-focused macro hedge funds gained 12.4 percent over the same period, according to Eurekahedge Pte, a Singapore-based industry data provider. Global macro managers wager on currencies, equities, interest rates and commodities based on their fundamental analysis of world economic trends.

The Asia Genesis Equity Fund, which started in May, returned 8.9 percent as of the end of July. The fund uses a long-short strategy, buying stocks the manager expects to rise and hedging those bets with short sales, or the selling of shares expected to drop.

Bloomberg

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Singapore-based hedge fund, Nalanda Capital, is said to be offloading its stake in outsourcing firm WNS Global Services.

From The Economic Times in India, news that a Singapore-based hedge fund, Nalanda Capital is said to be following private equity firm, Warburg Pincus in offloading its stake in outsourcing firm WNS Global Services.

A person familiar with the development told The Economic Times in India that Nalanda Capital has put its 12.3% in WNS on the block. The person requested anonymity as he is not authorised to talk to the media.  This comes a day after ET reported that PE firm Warburg Pincus has held initial talks to offload its 50.12% in WNS for an exit amount of $400 million. The transaction would value the BPO at $800 million.

While Merrill Lynch is believed to be advising Warburg on the stake sale, sources said Nalanda hasn’t appointed a banker but would just go with the seller that Warburg identifies. Since it owns less than a fifth in WNS, Nalanda would have lesser bargaining powers when it comes to price. Sources also said that apart from private equity firms such as Blackstone, Nasdaq-listed IT firm Cognizant is a likely suitor for WNS and will shortly kick off the due diligence process.

Considering that Nalanda Capital picked up a stake in WNS only last year, it wasn’t immediately clear why Nalanda Capital is selling its stake in the firm. “Nalanda Capital is structured like a hedge fund, so it does not have any long-term obligations to stay invested. Also, it will be the right time to exit as they would make a profit,” said an official from the private equity industry, who did not wish to be named.

It is pretty active in the open market and has bought shares in Mastek Global, Carborundrum Universal, Triveni Engineering, Kirloskar Engines Sun TV and Mindtree. Nalanda typically buys shares in multiple lots and tends to pick up 7-8% in any company they invest in.  The hedge fund initially picked up 5.25% in WNS last March and has upped its stake over the last year to become WNS’ third-biggest shareholder with 12.3%. While Warburg Pincus owns 50.44%, the second-biggest is Fidelity Management & Research with 12.37%.

The Economic Times

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Alternative investment management firm K-Atlas, based in Singapore, achieves spectacular returns in 2008

From JoonangDaily, news of a Singapore based joint venture between Korean and US investment  firms, that achieved very high growth in 2008.

Though many were toppled in the United States during the ongoing economic crisis, becoming an investment bank is still the holy grail for many financial institutions in Korea.

Korea Investment Holdings is one of those companies, and its management believes that despite uncertainty over the timing, the economy will get back to normal, and it will just be a matter of time before this dream becomes a reality.  And it may have a shot. Unlike other banking-focused financial groups in Korea, KIH is a holding company with emphasis on its brokerage and asset management businesses, key areas with high growth potential in investment banking.

In February 2008, Korea Investment Holdings and Atlas Capital Management established K-Atlas Advisors, a Singapore-based manager of alternative investment funds, and the launch of K-Atlas Fund, a Singapore-domiciled alternative investment fund targeting hedge fund and private equity investments.

K-Atlas posted more than 70-percent cumulative return rates for 2008, despite the global economic meltdown.

JoonangDaily

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AIMA Singapore: Draft European Directive on Alternative Investment Fund Managers could significantly impact Singapore’s hedge funds

From Opalesque, some potentially bad news for hedge funds in Singapore.   The Singapore Branch of the Alternative Investment Management Association (“AIMA”), the industry trade association for hedge funds, warns that the European Commission’s draft directive on Alternative Investment Fund Managers will make it unduly difficult for Singapore based alternative investment managers to access the European market. The directive will also complicate the allocation of a global portfolio’s fund management, making the delegation from Europe to Asia near impossible.

Under the directive, managers based outside of Europe will need to obtain a special marketing passport before being granted access to the European market. However, the passport will not be available for three years after the introduction of the directive. Significant obstacles to acquiring the passport will also be imposed; regulatory equivalence between Europe and the applicant’s home jurisdiction will need to be established, key criteria include comparable prudential legislation, equal access to markets, and a tax information-sharing agreement. Capital requirements and leverage restrictions will also need to be implemented. Local regulations will need to be effectively adjusted in manners outside current discussion in international regulatory forums.

The proposed directive will apply to all types of “non-UCITS funds”, including private equity, real estate, infrastructure, and hedge funds.

Michael Coleman, the Chairman of the Singapore branch of AIMA, commented: “The effect, if not the intent, of this directive is highly protectionist. If it is left unchanged it will have a major negative impact on the hedge fund industry in Singapore, which has a large European component to its investor base. Also, it will have negative consequences for European investors who will find their choice of investment opportunities severely restricted. ”

This will have an adverse impact on Singaporean investors with European funds or managers. Due to the restrictions imposed, compliance costs will increase and returns will lessen. European investors will also suffer from the higher costs passed on to them and face a diminished investment universe.

Opalesque

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US authorities are probing NIR Group hedge fund based in US/Singapore says WSJ

Reuters has reported that, according to the Wall Street Journal, the U.S. authorities are probing whether Corey Ribotsky, Managing Member of NIR Group, a New York & Singapore based hedge-fund, defrauded investors about their returns and the holdings of his various funds, citing people familiar with the matter.

The people told the paper that prosecutors from the U.S. Securities and Exchange Commission, Federal Bureau of Investigation and the U.S. attorney’s office in Brooklyn are looking at whether Ribotsky lied to investors as stock prices fell during the credit crisis. The paper said the authorities have not accused Ribotsky of wrongdoing. Ribiotsky has said he has $770 million under management.

Ribotsky’s lawyer declined to comment to the paper, saying the hedge fund manager and NIR “have no knowledge of any criminal investigation and have not been contacted by any authorities.”  Spokesmen for the SEC, FBI and U.S. attorney’s office declined to comment to the paper.

Reuters

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Savvy Fund Sees an Asia Backfire

The traders behind a Singapore-based hedge fund that outperformed last year are betting government efforts to stabilize Asia’s markets will backfire, yielding opportunities in foreign exchange and credit.

Last year, Artradis Fund Management’s flagship Barracuda fund returned 27% by betting on price swings in Asian stock markets through derivatives, or financial instruments whose value is based on an underlying investment. By contrast, the benchmark MSCI Asia ex-Japan index fell 27% in 2008.

While the plays on stock volatility were good to Artradis last year, now the firm is changing gears.

“We felt that the glory days of equity derivatives business in Asia were going to be restricted going forward,” partly because hedge funds bid up the prices of derivatives, squeezing returns, says Steve Diggle, one of the firm’s founders.

In addition, issuance of structured products containing derivatives has slowed, as wealthy individuals who bought these products in the boom have been burned and pulled back. “In order to grow, we needed to broaden to other markets and products,” Mr. Diggle says.

Artradis is wagering that government efforts in Asia to stimulate the economy and create stability will actually create market imbalances and, as a consequence, lucrative trading opportunities.

“Asian markets have a long history of government involvement,” with mixed results, says David Dredge, 44 years old, who recently left his job as deputy head of local markets at Royal Bank of Scotland Group in Singapore to help spearhead Artradis’s new effort.

Mr. Diggle and Richard Magides, in their mid-40s, previously worked together on the derivatives desks of Barings Bank in Singapore, where the rogue trader Nicholas Leeson caused the bank’s collapse in 1995. They founded Artradis in 2002 with about $4.5 million of mostly their own money. Since then, they have built it into one of the largest home-grown Asian funds, with about $2.5 billion under management.

When shares were rising, their funds produced lackluster returns. The situation reversed in mid-2007, when markets got clobbered and their bets on volatility paid off. Even amid success, Artradis was hit with massive redemptions of approximately $2.3 billion, which the firm attributes to the liquidity squeeze that forced clients and competitors to sell assets and raise cash quickly.

Also hurting the fund was the bankruptcy of Lehman Brothers, which the fund says owes it more than $100 million because of trades in which Lehman acted as counterparty and assets that have been frozen at the firm.

For investors in Asia, the ripple effects of U.S. stimulus efforts offer a road map, Mr. Dredge says. He points to moves by the U.S. Federal Reserve to stimulate lending. Concerns about inflation and the U.S. dollar have partly prompted investors to dump U.S. Treasury bonds, pushing up their yield and undoing Fed efforts to keep rates low. The trick for investors, he says, is to spot opportunities where government actions won’t be enough to override market forces.

The past week, short-term bank lending rates rose sharply in Asia as the region’s banks displayed concerns about the Fed’s ability to manage rates. “It follows that interest-rate volatility in the U.S. will be mirrored in Asia,” Mr. Dredge says.

Separately, the dollar’s weakness has led to gains in most Asian currencies this year, including the rupiah, the rupee and the baht. But expections that the dollar will continue declining could come to an abrupt halt, Mr. Dredge says. Some currencies, such as the Australian dollar, have weakened slightly this week amid worries that an economic recovery isn’t coming to fruition anytime soon.

Another possible macro shock could come if China and Hong Kong let their currencies appreciate against the U.S. dollar. While Hong Kong pegs its currency at a fixed rate to the dollar, China allows its currency to fluctuate, albeit in a highly managed way.

Big changes seem unlikely with either currency right away, though the wisdom of being so tightly bound to the dollar has come into question as fears grow about the dollar’s long-term prospects. Recently, Hong Kong’s monetary authority has intervened aggressively to uphold the 26-year-old peg.

From Laura Santini at the Wall Street Journal

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