At that point, it is more than a trend…
Stephen Satchell, the former Tokyo- based head of Asian proprietary credit trading at Credit Suisse Group AG, plans to start an Asia-focused credit hedge fund as early as this month.
The GCS Asian Opportunity Fund I will offer “small-to- medium sized” loans, mostly with an equity component, to companies in the region, said Satchell, 40, who set up Singapore-based GCS Capital Management. The fund could grow to $500 million to $750 million and will target annual gross returns of about 25 percent, he said in an interview on July 10.
GCS Capital is seeking to take advantage of trading opportunities in credit markets as banks and hedge funds sell assets at a discount to repair balance sheets or exit the region. Banks and brokerages worldwide have tightened lending and scaled back trading to conserve capital after reporting almost $1.5 trillion of losses and writedowns since the U.S. subprime mortgage market collapsed, data compiled by Bloomberg show.
“The goal of the fund is to be fairly nimble and opportunistic to focus on transactions that we think are mispriced,” Satchell said in a telephone interview from Tokyo, where he is currently based. “The secondary transactions will come from the investment banks and hedge funds that were involved in that business two or three years ago and are no longer involved.”
He said he plans to move to Singapore, where most of the firm’s transactions will be “originated and worked on.” The fund will initially invest in companies in Japan, China, Indonesia and India, he said.
Satchell, who will start trading with his own capital, said he is in talks with “two large institutional investors” who will likely put money into his fund. He declined to name the institutions.
GCS Capital also plans a second fund with a “longer-term lockup” that will invest in “more illiquid type of credit” such as commercial mortgage-backed securities and private loan transactions, he said.
“There are a lot of assets out there trading at economic levels for a variety of reasons usually not related to the actual underlying fundamentals of the borrower,” Satchell said. “We’re going to look at a variety of things on an opportunistic basis.”
While raising capital has been “hard,” Satchell said he is “fairly optimistic” that money will flow back to the hedge- fund industry.
“There is a lot of money on the sidelines, in institutions which just can’t sit there for too long,” he said. “Wealthy individual investors can always pull out in theory because they don’t mind keeping their money at zero; institutions, whether insurance companies or pensions funds, need to make money and zero doesn’t quite cut it.”
Hedge funds, beset by investor withdrawals in 2008, had net inflows for the second consecutive month in June, when they attracted $4 billion, according to Singapore-based data provider Eurekahedge Pte.
Satchell was the head of Asian credit trading at Commerzbank Securities in Tokyo from 2001 to 2003. He previously ran the Asian structured products group for four years at ING Barings and was based in the Japanese capital and Hong Kong.