Singapore Hedge Fund

Alternative asset management in Singapore

Yet another Hedge Fund starts in Singapore: GCS Capital Management

At that point, it is more than a trend…

Stephen Satchell, the former Tokyo- based head of Asian proprietary credit trading at Credit Suisse Group AG, plans to start an Asia-focused credit hedge fund as early as this month.

The GCS Asian Opportunity Fund I will offer “small-to- medium sized” loans, mostly with an equity component, to companies in the region, said Satchell, 40, who set up Singapore-based GCS Capital Management. The fund could grow to $500 million to $750 million and will target annual gross returns of about 25 percent, he said in an interview on July 10.

GCS Capital is seeking to take advantage of trading opportunities in credit markets as banks and hedge funds sell assets at a discount to repair balance sheets or exit the region. Banks and brokerages worldwide have tightened lending and scaled back trading to conserve capital after reporting almost $1.5 trillion of losses and writedowns since the U.S. subprime mortgage market collapsed, data compiled by Bloomberg show.

“The goal of the fund is to be fairly nimble and opportunistic to focus on transactions that we think are mispriced,” Satchell said in a telephone interview from Tokyo, where he is currently based. “The secondary transactions will come from the investment banks and hedge funds that were involved in that business two or three years ago and are no longer involved.”

He said he plans to move to Singapore, where most of the firm’s transactions will be “originated and worked on.” The fund will initially invest in companies in Japan, China, Indonesia and India, he said.

Second Fund

Satchell, who will start trading with his own capital, said he is in talks with “two large institutional investors” who will likely put money into his fund. He declined to name the institutions.

GCS Capital also plans a second fund with a “longer-term lockup” that will invest in “more illiquid type of credit” such as commercial mortgage-backed securities and private loan transactions, he said.

“There are a lot of assets out there trading at economic levels for a variety of reasons usually not related to the actual underlying fundamentals of the borrower,” Satchell said. “We’re going to look at a variety of things on an opportunistic basis.”

While raising capital has been “hard,” Satchell said he is “fairly optimistic” that money will flow back to the hedge- fund industry.

Sidelined Money

“There is a lot of money on the sidelines, in institutions which just can’t sit there for too long,” he said. “Wealthy individual investors can always pull out in theory because they don’t mind keeping their money at zero; institutions, whether insurance companies or pensions funds, need to make money and zero doesn’t quite cut it.”

Hedge funds, beset by investor withdrawals in 2008, had net inflows for the second consecutive month in June, when they attracted $4 billion, according to Singapore-based data provider Eurekahedge Pte.

Satchell was the head of Asian credit trading at Commerzbank Securities in Tokyo from 2001 to 2003. He previously ran the Asian structured products group for four years at ING Barings and was based in the Japanese capital and Hong Kong.

With Bloomberg

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Even Hedge Fund can burn their wings in Indonesia…

We are Migrating the blog here: http://singaporehedgefund.com – faster, better,bigger…….

This is a really good piece of news found on AsianInvestor

Once upon a time, Indonesia had a reputation for sharp practise. However, the balloon of epiphany went up after the Asian economic crisis of the late-1990s. The gatekeepers of Indonesia realised that, in business, their old game was up, and in order to obtain foreign investment, they would have to play fairly and decently. They did just that and everyone lived happily ever after.

It makes a nice fairytale ending, but who really is that lying in the bed of Little Red Riding Hood’s granny? And why does granny have such big teeth?

Hedge fund investors are finding the wolf under the eiderdown in the form of a deal they undertook with Central Proteinaprima in Indonesia. CQS, Marathon, Highbridge and GLG Partners, among others, are understood to have bought $200 million in 2% secured exchangeable bonds issued by a company called Red Dragon in 2007. The bonds were convertible into ordinary shares of Central Proteinaprima.

Red Dragon is a Singapore special purpose vehicle controlled by the Chearavanont family, which is behind both the bond issuer and the Charoen Pokphand Group that hails from Thailand.

The bonds that the hedge funds bought should have given them a 70% stake. However, the company undertook a rights issue, didn’t tell the hedge funds about it, and that has diluted their interest to about 41%.

That’s the precise moment when the two parties fell out of love.

Bondholders complained. Red Dragon got in high dudgeon and hired the lawyer that crushed Manulife in Indonesia. The firm started issuing multiple $1 billion writs suing just about everyone connected with their investor counterparties.

On the side of the Chearavanont family, up popped Hendrik Tee, the former CFO of consummate debt reneger Asia Pulp and Paper.

AsianInvestor tried to obtain a comment from Red Dragon regarding this story, but there had been no response at the time of publication.

If anything material has come out of financial crises, it is the invention of a new job description; a person who rapidly switches a white hat for a black hat and advises companies on how to combat investors.

It seems to add insult to injury that not only have the investors been diluted, but for the perceived upset they have inflicted on the issuer, they might also be billed billions of dollars.

Aha, but surely the court with jurisdiction over the deal is going to adjudicate that this a frivolous counter claim? Not so, because the governing law in the documentation is not only English, but Indonesian law as well. So it is back to the South Jakarta District Court, a familiar forum for foreign financial institutions.

There are two sides to every story, so AsianInvestor readers need not leap to conclusions just yet. We have asked Central Proteinaprima and Red Dragon to tell us their version of events.

Though it appears the moral of this story so far is that investors (yes even the sophisticated ones) need to read the fable of the frog that allows the scorpion to ride across the river on its back.

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