Revere Capital Advisors is exploring the potential of Asia’s emerging hedge funds as it seeks out managers performing above the generally flat returns offered by large strategies.
The New York- and London-based boutique alternative investment firm, set up in 2008 by several ex-Man Group executives, focuses solely on emerging hedge fund managers.
Also known as early-stage managers, they typically perform best in the first years of operation, when they are running relatively small amounts of capital and rely on strong returns to attract investors and earn performance fees.
Revere advises clients on investments in emerging managers, based on its analytical research of individual strategies. Its clientele is largely US and European family offices and small institutions.
“Until now, our research has been on managers in the US and Europe,” says Norbert Buffard, managing director of hedge fund research at Revere. “We are starting, at present, to look at Asia,” with an initial focus on managers in Hong Kong and Singapore.
In April, the firm launched the Revere Emerging Managers Founders Fund, with an undisclosed amount of internal capital. The initial plan is to build a concentrated portfolio of 10-12 managers, with a longer-term view of opening the fund to external investors.
“If we see a very compelling opportunity [in Asia], we hope to be able to invest some of our internal capital to these managers,” says Buffard.
The firm is seeing growing client interest in Asia-focused strategies managed from the region.
“There is a view that locally based managers have a niche, compared to managers that try to track the region but are not based in Asia,” says Buffard.
The diversification of strategies in Asia also provides investors with more choice, having widened from largely long/short equity to macro, event-driven and credit hedge funds.
“It’s more mature from a few years ago,” says Buffard. “There is definitely good reason to spend time and try to identify talent here.”
In terms of strategies, Revere prefers managers that don’t rely on specific market cycles to generate returns and tends “to have an interest in long/short equity, long/short credit, event-driven and discretionary macro”, says Buffard.
Revere believes it has a niche in offering research and advisory services, helping to build customised investment portfolios of emerging managers for third-party investors.
It differentiates itself from hedge fund seeders, which invest in early-stage managers in return for a stake in the fund, or a share of the fees charged to investors.
Revere does neither, with its internal fund investing in managers without having any additional business interests.
The emerging manager investment space is relatively small, although it is an area that is generating more attention as large hedge funds increasingly take on institutional investors, and as a result, less performance-generating risk.
HSBC runs an emerging manager-focused fund of hedge funds, called Next Generation, out of the UK which allocates broadly. It has invested in Asia managers, including Zeal Asset Management in Hong Kong, and Singapore-based Dymon Asia.
Gen2 Partners in Hong Kong had previously run two emerging manager funds called Infiniti Invenio and Conquistador II, which allocated globally – including to Asian strategies. It is understood that the funds were wound down about 18 months ago due to investor redemptions following the financial crisis.
“We want to find talent,” says Buffard, who is based in London. “We try to be open-minded in our research process and consider talented managers when we can find them.”