ESG is no passing fad, as more investors are convinced that alpha can be found in ESG and regulators continue to introduce rules to lift ESG standards.
The portfolio has been invested since November and has run up an estimated return to date of 5.2%. The principals believe it is the only such product available in Asia, and is being targeted to investors globally.
The size of the fund is currently $16 million, but its capacity is estimated at $200 million to $300 million - levels it could reach in a year or so.
GFIA has been researching hedge funds in Latin America alongside its established Asian business. It provides due diligence and portfolio management services.
Peter Douglas, principal of GFIA, says, ôAlmost all the underlying managers are physically located in the Latin continent. Our research strongly suggests indigenous managers generate better returns in emerging markets than managers based in the traditional hedge-fund centres.ö
The Latin American hedge fund industry has over $20 billion in assets under management and 150 hedge fund managers. The sub-advisor in Sao Paolo, Brazil is Claritas Investimientos, a local alternative investments specialist that currently advises in excess of $800 million in single-manager and fund-of-fund strategies. Its investment manager, Enio Shinohara, is a former partner of GFIA.
The fund was seeded by Sun Hung Kai Financial Group, the brokerage and financial services arm of Sun Hung Kai in Hong Kong. SHK fund management CEO Christophe Lee says, ôLatin America smells like Asia did five years ago. However, compared to Asia, this product would tend to have less emphasis on long/short equity managers, by virtue of the fact that Latin American cycles are shorter, so managers need to be more flexible with usage of asset classes.ö
Concerning currencies in Latin American, he adds, ôCurrency exposure will be hedged given the volatility in Latin American currencies, unless the manager is taking a specific position on local currencies.ö
HSBC will act as external administrator and custodian. HSBCÆs global head of alternative fund services, the peripatetic Paul Smith, will also act as an external director to the fund.
The Australian pension fund joins other asset owners in eyeing private credit opportunities in the Asia-Pacific region, although liquid defensive assets retain a majority of allocations.
In its second annual sustainable investment report, the sovereign wealth fund says it invested $1.79bn in ESG bonds. Experts say asset owners next need to consolidate their standards.
Senior executives at the Taiwan financial group and Canadian pension fund believe that companies have to make an ESG transition, and may not have a choice in a few years.
Record low borrowing costs in Australia are feeding demand for the country's real estate, with domestic and global investors raising their allocations into the sector.