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The Lien family had been investors in Overseas Union Bank, formerly the fourth largest Singaporean bank, which was sold to UOB. Michael Lien is a board member of UOB.
The fundÆs assets under management is currently $40 million and the plan is to raise up to $400 million at which time a capacity review will take place. The fund targets absolute returns of 12-15% and volatility of 6-8%. The Sharpe ratio in 2005 was 1.3%.
Short index futures are used to reduce beta which brings net exposure down to 40%. Stop loss limits are 7-9%. FCM added that its RiskOffice analytics system provided by its prime broker, Deutsche Bank had helped it tighten up its risk management procedures.
The fundÆs strategy focuses on anticipating arbitrage opportunities that involve capital restructuring and turnarounds.
The fundÆs operations and internal returns since December 2003 have been audited by PWC and returns have been 11.7% net with volatility of 9.3%. Marketing is beginning shortly, targeting private banks, distributors, fund of funds and prime-broking capital introductions.
Before moving back to Singapore with Morgan Stanley Lien worked for US bank in Indonesia and started his investment banking career with Standard Chartered.
ôSingapore has seen banking sector consolidation and now experiences far more competitive benchmarking of returns on capital,ö he says. ôWe envisage a similar trend evolving in Malaysia and Korea and, in due course, Taiwan.ö
Management fees are 1.5% and performance fee is 20% with a high water mark. The entry fee is up to 3% and the redemption fee is 2% if triggered within 12 months. However, there is no lock up.
The fund management industry in Singapore is regulated by the Monetary Authority of Singapore. However, FCM is exempt from holding a Capital Markets license and will be restricted to marketing the fund to qualified institutions and high net worth individuals.
The Administrator of the fund is HSBC, and its lawyers are Maples and Calder, and Deacons.
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