RMF to ramp up Asian hedge fund investments

Man InvestmentsÆ unit RMF says it plans to invest hundreds of millions of dollars into Asian hedge funds during 2008.
RMF Investment Management, one of the triptych of fund-of-hedge-funds subsidiaries of Man Investments, has indicated that it plans to make large new investments in its portfolio of Asian hedge fund managers during 2008.

Swiss-based Madrileno Jaime Castan, formerly an executive of Banco Santander in Hong Kong, has been the global head of hedge fund research for RMF since 2006. He told AsianInvestor during a visit to Hong Kong that the new money going into Asian hedge funds will be in the order of "hundreds of millions of dollars".

In the pantheon of Man InvestmentsÆ fund-of-fund operations, RMF is the institutional-oriented vehicle offering about thirty products and managing $25 billion. Looking at RMFÆs position on the risk/reward curve, it falls at a more conservative echelon to the more boutique-styled Glenwood and the new manager specialist Man Global Strategies. RMFÆs fees to institutions are 1% and 5%, and on volatility of less than 4% it has recorded a 10.8% net return to the end of October 2007.

Currently, RMF invests in approximately 25 Asia-focused managers, out of a list of 300 globally approved firms. Two-thirds of the Asian managers are operating long/short strategies with the remainder in relative value, event driven and global macro.

RMF thinks it might find another five Asian hedge funds for its portfolio, and whilst allocations may kick off at just $10 million, they can run as high as nine-figure sums for top hedge funds. In Asia, that process will be managed by Adrian Gmuer in Singapore, accompanied by a team of three which he will be expanding during 2008.

ôWeÆre looking for more Asian relative-value managers, especially those with fixed-income expertise, as well as event-driven managers, in particular those who have special situations and distressed debt exposure,ô says Castan. ôWeÆre interested more in broad strategies, and even though we do invest in single-country focused managers from time to time, we find they have a tendency to fall in love with their markets. We do want to be involved in Japan though, given the stretched underperformance of small caps there.ö

RMF has seen a trend towards tighter liquidity terms in hedge fund redemptions, as monthly liquidity has become rare in comparison to monthly and ninety day liquidity, especially when the hedge fund is looking at more illiquid positions. ôNo hedge fund wants to be an ATM for the market,ö says Castan.

RMF positions itself as a sticky investor, which is predicated on due diligence processes that can take six months to conclude. However, it has not wrapped itself in red tape and, by launching its internal processes into overdrive can get the go-ahead in less than a day to exit a hedge fund that is behaving irregularly.

To get to the top of RMFÆs report card, the main issue that Castan says he would like to see compliance on (excepting tip top performance of course), concerns the matter of transparency. He says that managed futures and CTA funds tend to be good at inputting their positions via ManÆs proprietary online reporting database. However, event-driven funds: you could do better.
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