Fairfield Straits Lion (FSL), a joint venture between $9 billion US alternative investment firm Fairfield Greenwich Group (FGG) and Singapore asset manager Straits Lion, has announced its second Asian hedge fund investment. FSL and FGG have together invested $20 million in Fairfield Ludgate Hill Asian Arbitrage Fund.
FSL will also share in economics of the new fund.
Hong Kong-based Ludgate Hill was founded by Mike Djen in 2002. Earlier this year, FSL invested $25 million in Fairfield Ajia-RPMH Asia Absolute Return Fund managed by John Ricardi.
The FSL JV launched in March 2004 was established with the intention to develop a multi-strategy Asian fund of hedge funds with low volatility and low correlation that could be marketed to Greenwich's investor base overseas as well as to Asian institutional clients. With its second investment FSL has teamed up with an Asian arbitrage manager.
The Fairfield Ludgate Hill fund pursues a discount arbitrage strategy to exploit the discrepancies in value between different types of securities issued by the same company in the Asia ex-Japan region. In particular the fund will exploit price anomalies between CBs and DRs and their corresponding local shares in the Asian financial markets.
Fund manager Mike Djen has over a decade of experience originating and trading convertible bonds and depositary receipts in Asia. Previously, he managed Deutsche Bank's Asia ex-Japan CB/DR origination desk.
Prior to that he set up JPMorgan's Asian CB/DR trading desk, where he managed to maintain a profitable trading book through the 1997 Asian crisis. Despite the recent low volatility environment and pressure on returns in the convertible arbitrage sector globally, FSL is confident of its investment in the Asian arb fund pointing out that the Ludgate Hill fund has returned 31.5% since its November 2002 inception and is up 2005 year to date.
Djen says, "We continue to be optimistic about the arbitrage opportunities available to us in Asia, as these markets remain less efficient that those of the US and Europe. Ludgate's strong relationships with local financial institutions enhance our ability to exploit opportunities in the region resulting from fungibility constraints in highly regulated markets such as Taiwan and Korea. Additional issuance in the Asian CB/DR markets keep us confidence of our ability to deliver absolute returns to our clients."
Tong Foo Cheong, FSL's CEO adds, "The fund's low correlation to Asian markets also holds diversification benefits for our Asian multi-strategy fund, bringing us one step cloer to the launch of FSL's Asian multi-strategy fund later this year. We'll continue to seek out and include first-rate alternative asset managers who share our capital preservation philosophy to our product line up."
FSL says it is currently in talks with other hedge fund managers and is targeting an investment with a total of five to six managers before launching its multi-strategy fund. FSL's head of business development Debra Ng says that in the coming months FSL will be looking to team up with some niche players and country specific Asian hedge funds to round out the multi-strategy portfolio.
She adds, "One of the unique characteristics of the funds on the FSL platform is that they provide full position transparency to FGG and FSL to enable timely risk analysis and compliance monitoring."
