Beverly Chandler interviews Alper Ince (pictured), PAAMCO managing director and sector specialist, on its recent expansion into emerging markets.
The fund of funds’ industry has experienced difficult times since the global financial crisis, but PAAMCO, which manages over USD10 billion in discretionary assets and advises on an additional USD11.8 billion in assets, seems to have survived and prospered where others have failed.
The firm was founded in 2000 and focuses on alternative investment solutions to the world’s institutions. Alper Ince is a Managing Director and the Sector Specialist responsible for the management of long/short equity and event-driven hedge fund managers in the various PAAMCO portfolios. As a member of the Investment Oversight Committee, he is involved in all stages of the investment process. In addition, Ince is responsible for managing relationships with certain institutional investors.
Ince says: “We have been ahead of many changes that the industry has gone through. When we set up, we were one of the few fund of fund providers asking for transparency from all underlying managers and in 2005 we set up our own managed account platform.”
PAAMCO’s advisory business is effectively a legacy business which they didn’t set out to plan. One part is for endowments generally, while the other part is a pension advisory business, as famously, and according to public information, they advise the Californian pension plan Calpers on their investments.
In their advisory capacity, PAAMCO helps with the strategic big picture using managed accounts and securing transparency and negotiating fees.
“Over the years we have responded to the needs of sophisticated institutions doing these interesting initiatives,” Ince says.
Emerging markets have become a particular strength for the firm with the hiring of Belgian bank KBC’s Asian fund of funds team in 2008 and then last year they took on an emerging markets team that emerged from Cargill’s Black River Asset Management.
“We knew the team and we were able to move those assets to us,” Ince says.
The new venture is PAAMCO Miren, a separate division from PAAMCO’s funds of hedge funds business, with offices in London as well as Turkey, Mexico and Colombia. PAAMCO Miren directly manages long-only equity portfolios in Europe, the Middle East and Africa (EMEA) and Latin America. The team is led by Yunus Emre Temiz, who has 19 years of industry experience and is joined by Federico Galassi and Felipe Gomez Bridge, who head the Latin American offices.
The Miren team also includes Ali Yavuz Birdal, Head of Research, Buket Ince, Associate Director, Patricio De La Torre, Latin America Equity Analyst and Juan Diego Mejia Mendez, Latin America Equity Analyst.
Soon after PAAMCO Miren’s launch, the Miren team re-established previous relationships and on 1 December, 2015, was managing USD1.1 billion, covering long-only, single-country mandates in EMEA and Latin America.
“We put them under a separate division because we just felt that the hedge fund of fund business is different from just running direct assets in emerging markets,” Ince says.
The emerging market sector has had a fantastic year, outperforming the old markets after years of underperformance. “If you look at the state of the world clearly what central banks are going to do matters a lot for asset classes and if the Fed moves, we have seen episodes where it has repercussions on emerging markets,” Ince says.
“Europe is in such uncertainty and people have doubts on the ECB programme,” Ince says. “Also people feel emerging markets offer better value versus European allocations because of the valuations and the growth profile you are getting exposure to compared with Europe which is not growing.”
Another strength for emerging markets is that concerns over China have lessened compared with earlier this year. “China is still a concern but it comes as you get more data and people are getting used to a slower Chinese growth than before but it is a softer landing than the market had feared,” Ince says.
“You need some stability but you also see quite a bit of divergence within the emerging markets. Clearly Brazil is the best performing country in the world at the moment, including developed countries. They have their own political calendar going on and political uncertainty being resolved.”
The plan is to build the Miren business out of Latin America and expand further in the EMEA countries, beyond Turkey, and into South Africa or Russia, where they might offer a regional rather than individual approach