Forsyth finds routes to North Asian institutions

Korean pension fund buys a note structured around hedge funds.

Paul Forsyth, CEO of his eponymous firm Forsyth Partners, says the UK-based investment advisor and fund of funds packager is pursuing separate strategies into the Korean and Taiwan institutional markets.

This reflects a broad shift eastward for Forsyth Partners, which has traditionally serviced UK and European clients from London, providing research on investment managers, advice on manager selection and funds of funds, both long-only and alternative. Now Forsyth himself has moved to a new office in Dubai, from which he can oversee the firm's growth into the Middle East and Asia.

While Forsyth Partner's business in Hong Kong is largely selling products and advice to private banks, it is developing more of an advisory business in Taiwan and Korea. But market conditions vary so in Korea, Forsyth Partners is working directly with institutions, while it has taken a more wholesale approach in Taiwan. But the common philosophy is that distribution has to be tailored.

The Korean team, led by David Kim in Seoul, has recently scored a success with the $7 billion Korean Teacher's Pension Fund, which invested in a structured note put together by Barclays Bank investing in a multi-strategy hedge fund sourced by Forsyth.

"Our license doesn't let us manage discretionary assets in Korea, so it's an advice-first business," Forsyth says. Most institutional assets are invested entirely in the domestic market but the trend is clearly to diversify abroad, but investors are wary of simply handing their money over to a third-party manager.

"Koreans are keen to diversify but fear the downside risk, which is why we work with banks such as Barclays and SG to provide principle protection," Forsyth explains. "Institutions can't buy our fund directly but they can purchase a note that's built around our fund. This gives us an opportunity to explain how the underlying fund works, discuss the benefits of different term structures such as tenor, coupon and participation level, and help them understand fee structures."

When the day comes that local regulations allow Korean institutions to buy offshore funds directly, investors will already have an idea of what these products are all about. But for now it's all about getting investors comfortable. Forsyth says typical allocations start at $20 million, and while a note can't accept new subscriptions, providers can create new notes with twists. "It's easy once the legal documentation is in place," Forsyth says.

Forsyth also sees an opportunity in Korea's upcoming corporate pension market, noting that mature schemes with older members will also want structured products.

The firm is taking a less direct approach in Taiwan, which now allows up to 35 professional investors to invest in private placements, in which nearly any kind of investment can be offered. For now the team, led by Richard Wang in Taipei, has no intention to register its products onshore for sale to the public. Rather, it is in talks with several securities investment consulting enterprises (Sices) to market a private placement to domestic investors. Forsyth Partners is open to white labelling or co-branding a series of strategies for domestic Sices looking for niche products to market. Forsyth Partners is also talking to Sices about helping them set up a legal structure so they can market offshore funds.

Initially, however, Forsyth Partners wants to keep its product offerings vanilla. The Taiwanese regulations are unclear as to offering an umbrella structure with multiple investment styles via one placement, or to what extent local investors can choose products within one placement. So for now the firm aims to keep it simple.