Kapstream Capital, a Sydney-based alternatives manager specialising in fixed-income and credit strategies, has launched an Asian bond fund with the aim of attracting inflows from regional and US investors.
The Kapstream Asian Bond Fund invests in high-grade regional debt issued in dollars, euro or yen, with 10% exposure to currencies in the region. It is targeting annual returns of 9–12% with volatility of 5%, net of fees.
The strategy – the launch of which was being planned around March – is running $50 million in AUM. Further inflows are expected via a Cayman Islands-based investment vehicle being set up to facilitate allocations by US and non-Australia-based investors.
“I see the interest in investing in the Kapstream Asian Bond Fund coming from sovereign wealth funds, funds of funds, family offices and private banks,” says Damien Hatfield, director of hedge fund advisory firm Triple A Partners Australia, which will market the fund globally. Institutions that have an Asian investment mandate may also take an interest, he adds.
Kapstream was founded in 2007 by Kumar Palghat and Nick Maroutsos, both former executives at Pimco, the world’s largest bond-fund manager. Last year, they brought on board Steve Goldman, previously a global lead portfolio manager at Goldman Sachs Asset Management in New York, where he oversaw $35 billion in fixed-income portfolios.
Kapstream runs about $4 billion in AUM through an absolute-return fund, a sovereign-bond fund and tailored mandates. It is 25%-owned by Australian fund manager Challenger, which provides distribution support, and Kapstream employees own the remaining 75%.
Hatfield is bullish on the prospects for Asia-focused credit funds, which are part of a niche, yet growing, hedge fund strategy. The Asian bond market now accounts for 12% of the global market, up from 6% in 2000 and is expected to quadruple in size over the next five years, he says.