Singapore-based Opvs Group has begun to manage its first two Asian credit hedge strategies after having built a full-scale framework meant to appeal to global institutional investors.
The three main principals of this new alternative asset manager are: Colin Blackwell, chairman of the investment committee and COO; Sandeep Gill, who runs the firm's liquid long/short credit strategy; and Christopher Francis, who runs its private debt strategy and the Opvs Asian Opportunity Fund.
They and their colleagues all have extensive experience working at large banks in Asia, and Blackwell continues to own a stake in his previous venture, European Credit Management, a large credit hedge fund based in London.
"We're ambitious but we must walk before we can run," Blackwell says of the new venture, which would like to join the ranks of Asia's few $1 billion-plus alternative asset managers. For now it is concentrating on what its principals know best, Asian credit, and Blackwell says between their own money and staggered commitments from US and European institutions, the firm should be running $100 million by early next year across two strategies, two funds and various accounts.
To achieve scale cannot be done by relying solely on Asian capital. Therefore the firm has already established offices in New York and London with five dedicated sales and client service people, all of whom report to Barry Dick in Singapore. Dick previously headed fixed-income sales for Merrill Lynch in Asia. The firm also relies on Tommy Kim, a businessman who recently established a fund of funds platform at Hana Bank and is now helping Opvs source institutional money, particularly from Korea.
The firm has been two years in the making. Blackwell and his colleagues believe in order to attract money from US pension funds, endowments and so on, they must have the full institutionalised structure from the get-go. The firm already has a staff of 25 or so in Singapore, plus the teams in New York and London. These include people to handle compliance, risk management, settlements and so on.
Opvs is also negotiating with SunGard to install its Front Arena risk management system for fixed income. It has also established independent boards of directors for its funds. "We want to do things that institutions in the US and Europe will appreciate," Blackwell explains.
The group has been ready to launch strategies and begin marketing for nearly a year, but the collapse of Lehman Brothers forced a delay. "10 months of time has been the cost to us of Lehman and [Bernie] Madoff," Blackwell says. But the wait was worth it, because there are so few Asia-based hedge funds that have a comparable framework.
In July, the firm launched its illiquids strategy, the Asian Opportunity Fund managed by Chris Francis, a fundamental credit analyst who ran the credit research team at Merrill Lynch and has followed Asian credits since the early 1990s. The strategy invests in illiquid bonds and loans, mainly securities from middle-tier growth companies that are now owned by hedge funds and prop desks in distress.
"You have to be a good fisherman," Blackwell observes of this kind of strategy, noting that it appeals to US investors as a private-equity like portfolio investing higher up the capital structure, delivering equity-like returns. He would not detail the fees but says they are based on a private-equity-like models.
In September, Opvs began its liquid trading strategy, run by Sandeep Gill, who previously headed credit trading at DBS Bank, which is one of the biggest players in this area in Asia. Gill says the strategy trades Asian offshore paper in dollars and euro. The strategy charges a 1% annual management fee and a 15% performance fee.
Opvs has appointed HSBC as its fund administrator, PricewaterhouseCoopers as its accountant and LInklaters as its legal counsellor. Swaps, repos, futures and other trading services are with several counterparts, including Barclays, JP Morgan, Standard Chartered and UBS.