Former FrontPoint Partners portfolio fund manager for Asia, John Foo, is readying the launch of a long/short hedge fund that is slated for a soft launch on March 20 with about $20 million in assets.
The Kingsmead Asian Alpha Opportunities Fund will use event-driven stock-picking tactics for its Asia ex-Japan strategy, which will be managed out of Singapore. The portfolio will comprise up to 25 stocks with one-third to one-half of the securities expected to reach a predicted target price due to a corporate event, says Foo.
He believes Asia is ripe for corporate events, given its standing as a growth region during a time of stagnation in the US and Europe. “We’ll see continued corporate activity on the M&A side in Australia and continued restructuring of Asian corporations,” he says. “There’s going to be an abundance of opportunities.”
Foo is on the lookout for short-selling opportunities in the form of overpriced businesses that “are poorly managed, in the wrong industries, or in industries that are very labour intensive. They’re losing competitiveness, losing margins, and those that are highly geared might even go out of business.”
The fund will be sector agnostic, says Foo, although it will avoid heavy exposure to technology because of unpredictable product lifecycles.
“One of the things that will differentiate this fund is that it will be a true regional fund,” he adds. “A lot of the hedge funds based in Hong Kong have a Greater China bias. We will have positions in Australia, Southeast Asia, India and Korea, in addition to Greater China.”
Foo is employing stock-picking tactics which he applied at FrontPoint – an event-driven hedge fund operated under Morgan Stanley, which was wound down last year – and an earlier incarnation of Kingsmead, which closed in 2009.
The fund’s capacity is $500 million, says Foo, adding that former investors in FrontPoint’s Asia portfolio and the previous Kingsmead fund have expressed interest in investing in the strategy. Early investors who allocate towards the first $100 million of AUM will be charged fees of 1% for management and 10% for performance, with the respective fees thereafter set at 1.5% and 15%. Both are below the industry standard of 2% and 20%.
“We want to signal to the market that this fund is about performance and [as such] the principals will not be making money off management fees,” says Foo.
Kingsmead is launching with an initial team of five in Singapore, with plans to set up a research office in Hong Kong later this year, which will initially employ up to two people.
“Having a Hong Kong office is extremely important because it’s a regional fund,” says Foo, citing the city’s large capital market and relatively short travel times to South Korea and China.
Kingsmead’s prime brokers are Bank of America Merrill Lynch and UBS, while Citi is the administrator.