Gen2 spun out by Kyle Shin, retains name

Gen2 Partners founders Paul Heffner and Barry Lau have rebranded the company as Adamas, putting a greater focus on private equity and seeding hedge fund managers.
Gen2 spun out by Kyle Shin, retains name

Gen2 Partners, an alternative investment manager focusing on fund of funds (FoFs) and private credit, has re-registered as Adamas after parting ways with South Korea-focused fund manager Kyle Shin last month.

Shin will continue operating under the Gen2 Partners name for the multi-strategy KS Asia Absolute Return Fund, which Gen2 co-founder Paul Heffner helped him to set up in 2010.

The departure of Shin and his staff means Adamas’s headcount has dropped to 22, from 30, and assets under management have fallen to $320 million, from $500 million.

Heffner and co-founder Barry Lau says Adamas’s management and Shin are now resolving an arrangement that will enable Shin’s fund to continue trading under the Gen2 Partners name.

By press time, Shin could not be reached for comment. Lau says Adamas’s management and Shin remain on amicable terms.

The rebranding reflects the consolidation and realignment of Adamas’s business focus more on private investments, adds Lau. He is referring to his private equity business, which provides mezzanine capital to Chinese small and medium-sized enterprises.

Having launched the first $100 million Asia Private Credit Fund (Fund I) in March 2010, Lau’s team is raising capital for a second strategy, the Greater China Credit Fund. This is targeting $275 million, with first closing scheduled for this month.

Adamas’s fund-of-funds business is also undergoing strategic changes, Lau says. The firm currently has some 30 managers largely in Japan and China on the managed-account platform. It is now considering investing some capital into other emerging hedge fund managers that have trouble raising capital due to lack of track record.

“Typically, when you are seeding emerging hedge fund managers, you and your investors will have a lock-up to ensure the managers have sufficient time to grow,” says Lau. “The usual practice is to have at least three years’ lock-up, after which the managers will have gained enough track record to be marketing and raising capital on their own.”

The decision to part with Shin is understood to be caused partly by the firm’s desire to clarify Adamas’s investment proposition for potential clients.

Now that Adamas’s FoF business provides seed capital to hedge fund managers, it is keen to avoid any potential competition for capital between the new seeding business and Shin's fund.

In a November interview with AsianInvestor, chief operating officer Alan Lau said Adamas would explore investing in emerging hedge funds with capital of around $10-15 million each.

“As an alternative manager, what we had been doing in the past was investing in private equity, private credits and hedge funds,” said Lau. “Our direction is focusing purely on growth companies, or managers we deem as having the potential to sustain high growth.”

In addition to the original investors in Fund I, family offices from Europe and the US have now made initial commitments to the Greater China Credit Fund, a seven-year closed-end fund, Lau says. The aim is to attract 25 investors as limited partners by the end of this year.

The second fund will invest in mezzanine financing in sectors such as pharmaceuticals, eco-tourism and resources. The first fund had also invested in mining operators and property developers.

As for Adamas’s tie-up with China Private Equity Investment (CPE) in November, in which it has a 3% stake, Lau says the shareholding will likely increase this month, but did not give further details.

Listed on the London Stock Exchange’s AIM market, CPE focuses on private equity opportunities in the financial services and telecoms, media and technology (TMT) sectors. Being an open-ended PE fund, CPE is free to issue new shares to Gen2 if they are keen to co-invest in a company.

¬ Haymarket Media Limited. All rights reserved.