Pacific World Asset Management, a Hong Kong based fund of hedge funds advisor will soon launch a new single manager fund, the Corporate Arbitrage Manager Fund (CAM), focused on merger arbitrage as its core strategy. Paulson & Co, a $2.5 billion US-based hedge fund will act as the trading advisor. CAM targets an annual return of 15%-20% with an associated volatility of 7%.
"CAM's launch is a good opportunity to capture the rise in M&A activity we are seeing in the US and Europe. Bigger deals are expected to come through with bigger spreads meaning higher arbitrage returns," says Clinton Poh, principal and director of marketing at Pacific World. "Paulson has accumulated over 10 years of experience managing merger arbitrage funds and has maintained a top ranking track record performance in its investment category."
Pacific World currently has $720 million under management. Stella Lau, associate director of marketing, expects that bourgeoning interest for their guaranteed products as well as the new merger arb fund will take that number up to the $1 billion mark in the near future, making Pacific World one the largest Asian-based fund of hedge funds.
According to Lau, the bulk of the firm's investors are Asian high net-worth individuals, whom they access through IFAs and private banks. Geographically, interest has come largely from Taiwan, Singapore and Malaysia as well as the Middle East, although Lau expects to see growth from Korea and China in the coming year.
"Our edge is that being based in Asia we are in close contact with our investors and are able to tailor products to suit their appetite," says Lau. "Asian institutions and banks have also shown a keen interest in our structured products and we expect them to make up a growing proportion of our investor base."
Despite their Hong Kong location, Pacific World does not invest in any Asian-based hedge funds. "Asian hedge funds pursue mostly long/short strategies. Our focus is on arbitrage strategies, as we strive to provide clients non-directional, low risk investments with attractive returns. For the moment, the choices of arbitrage strategies in Asia are limited," says Lau.
Established in 1993, Pacific World developed their first in house fund of hedge funds in 1998. By 2001 the firm began marketing their first product, the Global Arbitrage Strategy Fund Plus. Pacific World currently has 10 funds under management, four of which are guaranteed notes.