Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
They launch the fund at the end of July at an asset level that they predict will be $50-100 million, although if talks with strategic investors are fruitful, they may launch with up to $200 million. The managers say, however, that the strategy has a capacity of $3 billion without leverage, and are targeting the fund to reach up to $1.5 billion.
The fund will employ three strategies: equity/debt trading, real estate investing and corporate investment, the latter with a private-equity flavour. The portfolio split between the three sub-strategies is anticipated to be 20/40/40. Target returns are 20-30% across the board, with trading making approximately 20% and the real estate/direct investment portions yielding 30-50%.
The new fund, to be named Newtonian Asia Fund, will feature John Kim as CIO, Young Cho as head of trading and Hong Na as head of real estate and Korean business. During their six years operating their strategy at Citigroup, in which they managed internal proprietary funds, they lay claim to a 51% return on capital, which brought in an estimated $790 million.
The Citi team started off in trading but found those corporate relationships naturally segued into other types of investing, such as real estate and private equity. So they are bringing that multi-discipline approach to the new fund.
CIO John Kim was attending the Morgan Stanley hedge fund investment forum in Shanghai, presenting the new fund. Before Citi, he had worked at Hong Kong hedge fund LIM Advisors, where had had looked into setting up a new fund; before then he worked at Sumitomo Finance and Bear Stearns.
Fees for the new fund will be 2% and 20%. There may be a soft lock-up of two years.
Service providers are Morgan Stanley as prime broker and Bisys as fund administrator. The lawyers are Sidley Austin and Maples and Calder.
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Hesitancy aside, institutional investors eye Australia and Japan as promising geographies for private debt investments within Asia Pacific, with Greater China and Korea on the periphery.
While Asia still lags the global average, interest in sustainable projects is growing fast; the only thing needed now is the expertise to drive growth
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.