Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
The fundÆs target return levels are 15%-20% per annum, over a two- to three-year horizon, with an annual volatility of 10%. Sparx will charge a 1.5% base fee and a 10% performance fee. A high-water mark applies and there is an initial lock-up of one year.
The portfolio will reflect a relatively concentrated level of 5%-20% of net asset value per manager. The fund expects to invest in up to 15 names with 5-10 managers as core holdings at first. Strategy-wise, Sparx is targeting arbitrage, corporate restructuring, event-driven, increased volatility, volatility trading and classic equity long-short.
Market commentators might ask whether Sparx is joining the party too late with its offering. The China market is already in full flight and valuations are sky high.
ôThis fund was actually created based on a specific request from one of our clients. The client wanted a product that could capture various long-term investment opportunities in China,ö says Masaki Taniguchi, head of Sparx Group's Hong Kong office and co-head of Sparx Fund of Funds. ôWe also believe that China is a long-term play. Given the size and diversity of opportunities in China, as well as the expansion of China-focused hedge fund universe over the past two years, we proposed a fund of funds approach.ö
Sparx has pushed its boundaries out beyond the Mainland, mindful that some securities benefiting from China's growth may not necessarily be listed on the local markets, or on occasions when Shenzhen and Shanghai markets look expensive. ôCurrently, there is more exposure in Hong Kong than in China because we see further upside to Hong Kong-listed stocks from the QDII changes,ö says Taniguchi.
Tokyo-based Sparx, which acquired Hong Kong hedge fund PMA in 2007, now has more than $14 billion in assets under management, with offices in New York, London, Hong Kong, Seoul, Dubai, Sydney and Bermuda. Its fund of hedge fund operation already has global and Asia-dedicated strategies dating back to 1997 and 2002 respectively.
Regulators keep their eyes open on tightening insurance industry by introducing more detailed risk management requirements, which could bring pressure on smaller players.
China and India are more obvious choices for AustralianSuper to consider in Asia Pacific, but the super fund currently lacks the expertise and prefers to stick to the US and Europe.
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Investors are increasingly turning to private companies and private debt in their hunt for ESG alpha, but the age-old problem of transparency and due diligence remains