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James Williams, news editor, Hedgeweek

CPE and Gen2 form strategic partnership, Matterhorn plans SE Asia long/short hedge fund, India-focused hedge funds return 9.97 per cent in September…

The AIM-quoted investment group China Private Equity Investments Holdings Limited (CPE) has agreed to develop a strategic partnership with Hong Kong-based Gen2 Capital Partners Limited, an independent asset management firm with assets under management of approximately USD500million.

The move is intended to boost CPE’s growth potential by marrying its own private equity experience with Gen2’s proven investment and risk management processes in the Greater China region.
As part of the agreement, CPE intends to appoint David Kiang, a Gen2 senior advisor, to the CPE Board as a Non-Executive Director.
CPE has already reviewed the current portfolio of assets held by Gen2, and identified a number of assets that would be attractive additions to its own portfolio of investments.
Subject to further review and negotiation, it is likely that CPE will acquire certain assets from the Gen2 portfolio for a consideration that could comprise cash and/or ordinary shares in CPE. Gen2 may become a significant shareholder in CPE in due course.
CPE Chief Executive Officer, John Croft, said: “This Partnership represents an important step to what we hope will become a long-term strategic relationship to realise benefits that might be achieved from exposure to wider market opportunities and from the experience and institutional reach of Gen2.”
Gen2 Managing Partner Barry Lau added: “We are delighted by the opportunity to work with CPE to develop a strong investment platform catering to the needs of European investors, and are looking forward to reaping the benefits brought to Gen2 by our resulting exposure to the London markets.
“Working together, we expect to benefit from the high standards of corporate governance and transparency which CPE’s London listing requires, and believe that jointly our combined team of professionals, robust investment and risk management processes should generate enhanced returns for investors on both sides.”
London-based Matterhorn Investment Management LLP, an emerging market fund specialist, believes Southeast Asia is one of the next growth markets for stock pickers and is planning to launch a new long/short hedge fund in early 2013 reported the Wall Street Journal this week. The fund will invest primarily in Indonesia and the Philippines and focus on growth opportunities in the consumer, infrastructure and banking sectors according to Paul Bate, Matterhorn’s founder and CIO.
Upon launch of the USD30million fund next year, Matterhorn will look to invest in companies such as PT Mitra Adiperkasa, which manages more than 1,000 stores across Indonesia including the likes of Lacoste and Starbucks. Given the consumer boom in the region, Southeast Asian banks are also expected to prove attractive growth stocks, such as BDO Unibank Inc. in the Philippines.
Bate was quoted as saying: “The whole region has a very strong banking system. They have essentially moved to the other extreme of caution and have low debt. Deposit growth is increasing with the capacity to get credit out to people that have never had credit.” The fund will protect itself against volatility by investing in small cap companies and short the biggest or weakest company in each market sector to also make money on the downside. 
India-focused hedge funds returned +9.97 per cent September this year, marking their best performance since May 2009 reported the Hindu Business Line this week. Year-to-date that puts them +9.4 per cent, marking a sharp turnaround on 2011, when funds saw almost a quarter of their AUM wiped out. Over the last three months the Eurekahedge India Hedge Fund Index has returned +10.9 per cent. Multi-strategy hedge funds have proved the most effective this year, returning +14.5 per cent, with long/short returning 9.9 per cent and fixed income funds a more modest +1.6 per cent.  

Ronnie Wu, head of Hong Kong-based Penjing Asset Management which was bought by FoHF firm Gottex this year, believes South Korea is one of Asia’s most important hedge fund markets
. Speaking with Investment Europe this week, Wu said that a set of regulatory amendments introduced by South Korea’s Financial Services Commission helped provide more leeway for onshore hedge funds and allowed security firms to act as prime brokers to hedge funds. This, he said, would give South Korea greater bandwidth to local hedge funds and attract more talent into its hedge fund industry, adding: “From a country allocation stand point, outside of Japan, Hong Kong and Australia, Korea is a very important market given its depth and breadth.”

Wu also pointed out that under the new rules, onshore hedge funds would be relieved of “certain investment restrictions” they currently face, and this would “widen the scope for offshore investors to take advantage of the full potential in Korean capital markets”.

Finally, Morgan Creek Capital, the US alternatives FoF manager, has hired Anand Prasanna from Squadron Capital as it aims to focus more on emerging Asia private equity, reported AsianInvestor this week. Prasanna is relocating from Hong Kong to Shanghai as a director with Morgan Creek Capital, where he will oversee investment activities in Asia with a particular slant on India. Previously, Prasanna worked as an investment director for Southeast Asia and India at Hong Kong-based fund-of-private-equity-funds firm Squadron. Morgan Creek is in the process of raising capital for Morgan Creek Partners V, a global fund of PE funds that has an allocation to emerging Asia, in addition to the US and Europe. Apparently, the fundraising target for Fund V is USD150million, having already raised USD28.8million through March this year.   

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