big potential in Asia debt: Hedge Fund to cash in…

NEW YORK (Reuters) – As hard-hit Western banks and hedge funds scramble to sell their Asian loans and bonds, one newcomer expects to pick up these choice assets at rarely seen discounts.

Opvs Group is launching two Asia-focused credit funds designed to benefit from the region’s underlying growth potential by acquiring debt at prices depressed by the global financial crisis.

That’s a classic opportunity, said Barry Dick, who left Merrill Lynch last year as its Asia head of debt products distribution and co-founded Opvs.

“Asia has been sold off in line with the rest of the world. It really looks like a case of the baby thrown out with the bathwater,” Dick said in an interview.

Dick founded the Singapore-based firm with three other Asia veterans: Chris Francis, who ran Asian credit and later equities research at Merrill; Sandeep Gill, former global credit derivatives head at DBS Group Holdings Ltd; and Tommy Kim, co-founder of Singapore-based HFG Investments Pte.

This team spent the past year building a 25-person firm that will be dedicated to the region and, for now, one asset class.

“There are a lot of boutique operations in the region — five guys in a garage and a prime broker — but we wanted to build a large asset management company, the best in Asia, with very specialized investment teams.”

Opvs is rolling out two funds in the coming month.

First will be the Opus Asia Opportunity Fund, which will snap up loans from closely held, high-growth companies in a region reaching from China, Japan and Southeast Asia to India and Australia.

It has been seeded with $50 million and will complete its first round of fund-raising on Tuesday, but will continue adding money through the fall.

The fund will hold these credits until maturity, with proceeds paid out as distributions after one year and then every six months until all the loans mature.

Later next month Opvs will launch Fundamental Asia Credit Fund with $50 million initially and growing to a maximum $300 million. The fund will invest in highly liquid and publicly traded bonds and short bonds through the swaps market.

In a sign of the times, both funds will provide shareholders with Internet access to their portfolio holdings.

In contrast to just a year or two ago, when Asia was a top priority for every Western bank and fund manager, the fast growing region has become a lot less crowded. These same investors have been forced to shed portfolio holdings and often turn first to their Asian assets.

The potential returns on these investments are high, Opvs says, because loans extended by big banks like Merrill, Goldman Sachs and Morgan Stanley during the boom years of 2005 through 2007 are now being sold off at fire-sale prices.

In recent months, emerging markets funds have become a hot item in the hedge fund community. Still, for the relative few prepared to step in today, what was a sellers’ market quickly has became bargain city.

“There’s been a big shakeout since the credit crunch,” Francis said. “That’s left us in a situation where there is an excess of sellers of credit, or people holding credit, but not a lot of people who have balance sheets to take up that capacity.”

Jean Viry-Babel
senior partner
VBK partners

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