Partnerships between Asia-based asset managers and Swiss private banks are hardly unusual these days. But yesterday a deal was announced that looks to offer something a little different.
Hong Kong-based Samena Asia Managers (SAM), Samena Capital’s hedge fund seeding business, and Geneva-based Reyl & Cie have formed a joint venture to sell hedge fund and private equity vehicles to sophisticated investors in both Asia and Europe.
Samena also plans to leverage Reyl’s distribution and asset-management capabilities. The Swiss bank has an asset-management arm in Geneva; it also opened a wealth-management office and won a capital markets services licence for fund management in Singapore last year.
Samena Capital, with $400 million in AUM across various closed-end structures, focuses on principal investments in the Indian subcontinent, Asia, the Middle East and North Africa – hence its name. It is in the process of launching its second special-situations fund, the Samena Special Situations Fund II, with a targeted final close of $700 million.
SAM seeds hedge funds in Asia with around $25 million to $50 million; it has an existing $96 million vehicle, Angel Fund I, and plans to soft-close Angel Fund II later this year.
Julius Wang, head of SAM in Hong Kong, sees strong and growing demand for hedge fund investments. Post-financial crisis, the number of hedge fund start-ups dropped heavily, but activity is now rising, he tells AsianInvestor.
Many global seeders of Hong Kong-based hedge funds fell by the wayside after 2008, with few now remaining. “Global seeders come [to Asia] when times are good, but they pulled out post-crisis, leaving many local funds high and dry,” says Wang.
Now, with banks shedding proprietary traders due to the pending Volcker Rule, a lot of experienced people are coming into the market and global multi-strategy funds are increasingly being set up, he says.
“However, it’s not always easy these days for even experienced individuals to raise money and get their message out to the market,” he says. “That’s one of the reasons we entered into the deal with Reyl; it will help the seeded managers to raise capital more quickly.”
Samena’s Angel Fund I is currently making one last investment, while the firm aims to close Angel Fund II this autumn with $150 million to $200 million.
The first vehicle typically seeded hedge funds with $15 million to $25 million and has posted returns of 23% since it was set up, as Vision Asia Pacific, in 2007. The second will have a wider remit; it will also invest in managers that already have $25 million or more with a view to helping them reach, say, the $50 million mark. Both funds focus on Asia-based managers.
Wang targets 20%-plus annual returns from the funds, though he stresses this will depend on the market. Performance will come from a combination of the underlying returns and from a partnership stake in the business itself. The investment period will vary from investor to investor, but a typical timeframe would be two to three years to give each manager time to get going.
One big difference between SAM and a fund of funds, he notes, is that it is seeking managers that can not only make money but are well suited to building a business.
Charles Bok, chief executive of Reyl Singapore, points to demand for such funds from both Asia and Europe. “Investors are looking for something different; they are often fed up with the same old products offered by the big banks,” he says. “This is a real opportunity to offer clients very sophisticated products with a high level of transparency.”
Of Reyl’s three business lines – wealth management, asset management and family office services such as trust planning – the Asia business is initially focused on wealth management. That said, the firm’s expertise on the family office side is complementary, says Bok, so it will likely develop a family office business in Asia as well.
Having shifted existing assets from Europe to Singapore, Reyl was profitable from day one, but the firm is developing a true Asian client base and has hired a local team, says Bok.
The bank wants to leverage Samena’s expertise in closed-end funds in Asia to encourage the region’s investors to consider such vehicles. “It’s difficult to get investors in Asia to invest in five-year closed-end funds,” says Maximilian Tomei, co-head of the executive board at Reyl Asset Management in Geneva. As smaller firms, the two firms need to offer alpha, he adds: “That’s all that counts.”
Samena started its seeding business with $75 million in capital, which originated from the June 2009 takeover of Vision Asia Pacific, a subsidiary of Hong Kong-based investment firm Vision Investment Management. Wang had headed Vision Asia Pacific, and following the acquisition Samena set up its own Hong Kong office in October 2009.
SAM has strict selection criteria as to which hedge funds it invests in – covering the background of fund managers, their experience and the team – but is “agnostic” as to strategies. It will invest in any hedge-fund strategies that it feels will perform well.
That said, the firm sees equity-orientated funds as the most attractive at present due to the opportunities in that asset class; its latest seeding was a Greater China long/short strategy called Snowlake. But it has invested in other types of funds in the past – including volatility, market-neutral and fixed-income strategies – and will continue to do so.
Meanwhile, Reyl is also working on other distribution deals in Singapore and markets including China, but this is the first joint-venture in Asia the bank has done at group level.
That said, it’s hard to find partners with the right principles, says Tomei, although fortunately for Reyl, the firm doesn’t have to rush into ventures to raise assets, because it is backed by both asset- and wealth-management capital.
Reyl’s global AUM is $4.5 billion, of which $1.5 billion is under the asset-management arm. It runs six funds, including asset classes such as European long-only equity, long/short and fixed income.