While vaccine rollouts suggest an end is in sight for the Covid-19 crisis, the closure of a long-standing Asian credit manager shows that the pandemic continues to take its toll on the investment industry.
The decision last month to shut down Hong Kong’s Double Haven Capital has highlighted not only how tough it is for new strategies to raise capital in the current climate but also the impact of travel restrictions on investment executives split from their families.
Double Haven, set up by Darryl Flint in 2011 with members of his team from Sparx Asia Investment Advisors, had managed $700 million at its peak in 2015, including allocations from global institutions such as a pension fund, reinsurance firm and endowment. It is in the process of winding down, with the regulatory licences of its management team having ceased on December 31.
Chief investment officer Flint took the decision to close the firm shortly before Christmas, head of client solutions David Walter told AsianInvestor. Double Haven was running less than $25 million of internal capital at the time, he added, declining to name the previous institutional clients.
In a letter to investors seen by AsianInvestor, Flint said he had made the move in the face of “the challenges of travel and capital raising in this environment and, more importantly, forced separation from families”.
After 27 years in Asia, Flint will return to the UK in the second quarter of this year, he wrote.
The shutdown was not for lack of effort to bring in new capital.
After closing its long-only credit fund in late 2018 – resulting in the departure of the main institutional investors – it continued to run a long/short credit fund and struck a strategic partnership with Credit Suisse Asset Management in August 2019. The Swiss firm invested capital and provided access to its distribution network.
Then in March last year, Double Haven launched a distressed credit fund with proprietary money.
“We sought to raise money and were also looking at co-investment and private deals too,” said Walter. “Then we were hit first by the Hong Kong [pro-democracy] protests, which made people a bit nervous, then by Covid, which affected the ability to travel and go out and talk to people.”
As others in the market have pointed out, allocations subsequently tended to go to well-established strategies, he added. “So for us the performance was great, but the timing was shocking", particularly because there is “a lot going on in the distressed private space in Asia”.
“We were trying to find a solution in terms of funding and were talking to various people,” Walter said. “It didn’t come through though.”
A senior executive at another Asia-based credit fund manager made a similar point. For new or small strategies, 2020 was a tough year for capital raising, he said. “It’s understandable that some people would make the decision to throw in the towel.
“A lot of people have families that are split, with people used to long-distance commutes, but it’s harder now with Covid,” the executive said on condition of anonymity.
In addition, he said, “it’s harder for new funds to see LPs [limited partners, or investors] and also to do deals.
“In fact LPs may look back in years to come and wonder if they should have backed a small or new firm, because sometimes it’s not just about making the safe choice that gets you the best performance.”
Nonetheless, Double Haven's senior executives may not be short of career opportunities. Given their experience, the credit fund executive added, "a lot of firms will be interested in talking to them."