Singapore Hedge Fund

Alternative asset management in Singapore

The first video of this Blog

This was 3 days ago on Bloomberg:

Hedge funds saw net inflows in May for the first time in 10 months.



Jean Viry-Babel
senior partner
VBK partners

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More silly hedge fund coverage

Here is an interesting post from Felix Salmon on his blog

What is it with Bloomberg’s Singapore bureau? Not content with a ridiculous article suggesting that US inflation might approach Zimbabwe levels, they’re now running a silly story about a shop by the name of “36 South Investment Managers Ltd” (me neither, but the only AUM datapoint I can find is that one of their funds has an extremely underwhelming $11 million under management.)

36 South is setting up a fund which will buy out-of-the-money call options on stocks and commodities, in the hope/expectation that if we enter a world of global hyperinflation, it will make lots of money:

The Excelsior Fund targets returns that will be five times the average annual rate of inflation of the Group of Five economies — France, Germany, Japan, the U.K. and the U.S. — should the rate exceed 5 percent.

This is just daft. France, Germany, and Japan between them account for 60% of the basket: is anybody anticipating hyperinflation in Japan? Besides, given the leverage they’re employing, how much time needs to elapse before they run out of money? As Vincent Fernando says, anybody thinking of investing in this fund would be much better off buying options on Treasury ETFs. And as Ryan Avent says, 5% isn’t hyperinflation anyway.

But more to the point, why is Bloomberg writing about these guys, given that they have zero demonstrated ability to get taken seriously by anybody with real money to invest? The reporter, Netty Ismail, quotes the co-founder of the firm as saying with a straight face that $100 million would be a “good” amount to raise, despite the fact that there’s no indication whatsoever that he’s raised anything like that sum in the past. If a well-known fund manager with a proven track record came out with a fund like this, that might be interesting. But this looks like little more than a marketing gimmick, designed — successfully, it would seem — to get press.

Incidentally, it would be nice if anybody writing about small and startup hedge funds did a bit of due diligence on them first. Before writing about firms like this as though they’re legitimate, any reporter should first confirm that they are legitimate — perhaps by asking to speak to their prime broker or asking to see some audited accounts for prior years. Otherwise, what’s to stop any old fraudster from calling himself a hedge fund, getting a couple of credulous Bloomberg stories, raising a few million, and retiring to the beach?

Jean Viry-Babel
senior partner
VBK partners

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Flowering Tree Investment Management Pte

I came across this new fund on Bloomberg… worth keeping an eye on…

June 4 (Bloomberg) — Flowering Tree Investment Management Pte, set up by the co-founder of New York-based Sansar Capital Management LLC, plans to grow its Asian equities hedge fund by about 20 times its starting capital within the next two years.

The Singapore-based fund made its first bets on rising and falling stocks in Asia outside Japan last month, starting with $12.5 million sourced from founding members, family and friends, founder Rajesh Sachdeva, 40, said in an interview yesterday. It will grow to $15 million to $16 million by July, and plans to reach $200 million to $300 million in two years.

Flowering Tree’s startup will have to source funds from a smaller pool after clients withdrew almost $24 billion from the region’s hedge funds last year, according to Eurekahedge Pte data. An index tracking Asia-focused long-short funds rose 4.2 percent in April, the best performance of nine groups followed by Singapore-based Eurekahedge, after the strategy slumped 22 percent in 2008 in the industry’s worst year on record.

“Equity-focused funds right now would probably be able to pull in some money given the optimism in the market, although a lot of people believe this rally might end pretty soon,” said Ankur Samtaney, an analyst at Eurekahedge. “Investors and managers are taking a cautious approach at this time.”

The regional benchmark MSCI Asia-Pacific excluding Japan Index has rallied 63 percent since its March 2 low after tumbling 53 percent last year. Members of the index are valued at an average price of 1.8 times the book value of their assets, compared with 2.5 times in 2007, before stock markets collapsed, according to data compiled by Bloomberg.

‘Fertile Environment’

A “fertile environment for stock picking,” will help the fund build a track record to lure investors, Sachdeva said. “It’s a great time to be picking stocks right now; it’s not a great time to raise money.”

Sachdeva was a partner from 2005 to 2008 at Sansar Capital, a New York-based firm that manages an Asian equities hedge fund, where he helped assets under management grow to $3 billion. He was unable to give performance details for the Asian fund.

He was previously an investment analyst at Kingdon Capital Management LLC and Alliance Capital Management Holding LP, now known as AllianceBernstein Holding LP.

Flowering Tree’s new fund’s equity long-short strategy is more likely to work this year and in 2010 than last year, when companies’ fundamentals were ignored during “a period of extreme market dislocation,” said Sachdeva.

Sachdeva said the fund will reduce its long and short positions in volatile markets.

Reinvesting

“You size up your balance sheet significantly when it’s working and significantly shrink your balance sheet when it’s not,” Sachdeva said.

Flowering Tree, which has a team of 10, including four investment professionals, has set aside $4 million in capital to fund its business for at least two years, Sachdeva said.

“I’m lucky that my previous startup was relatively successful and was profitable for me, so I’m reinvesting some of those profits and starting an organization like this upfront, as opposed to building it out at a later stage,” he said.

Investors are likely to put money into Flowering Tree’s hedge fund from the end of the year, he added. The hedge fund, which targets average annual returns of “mid-teens to high- teens” over five years, has the capacity to grow to $1 billion to $1.5 billion, he said.

From  Bloomberg

Jean Viry-Babel
senior partner
VBK partners

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