US-based Skybridge Capital teams up with Korea’s Woorie I&S
16 July 2013
News, Korea, USA
By Toby Garrod
SkyBridge Capital, a research-based alternative investment firm headquartered in New York, and Woori Investment & Securities (Woori I&S), headquartered in Seoul, South Korea, announced on July 9 a strategic partnership that will allow for the distribution of SkyBridge's hedge fund products throughout Korea and other markets in Asia. In conjunction with the partnership, Woori has also allocated capital to a SkyBridge fund of hedge funds vehicle.
Representing both large institutional investors and individual retail investors, SkyBridge manages or advises on approximately US$7.9 billion in assets, as of April 30. This agreement further solidifies the firm's commitment to increase the global distribution of its hedge fund product portfolio, including multi-advisor, multi-strategy fund of hedge fund products, custom portfolios and advisory services.
"Forging a partnership of this kind with one of the largest securities firms in Korea underscores our commitment to providing alpha-centric hedge fund solutions to a broad, global investor base, and displays the increased appetite for this type of product among investors in Asia," said Raymond Nolte, co-managing partner and chief investment officer at SkyBridge Capital. "We are delighted to team up with a world-class player such as Woori and look forward to strategically expanding the relationship over time."
Woori I&S offers a broad range of financial services, including wealth management, investment banking and prime brokerage. With client assets of 148.9 trillion Korean won (around US$100 billion), Woori I&S serves its clients through its more than 117 domestic branches in Korea and 13 overseas offices and subsidiaries.
"Investors in this region are seeking to diversify portfolios to include more alternative investment options," said Eun Soo Kim, head of global division for Woori I&S. "We believe that SkyBridge's thoughtful, thematic investment strategy and high-conviction approach to alpha generation will help us to provide our clients with a high-quality hedge fund investment option."
Interest from the institutional side of the market is expected to prove key to development.
Given the high investment required from individual hedge fund investors in Korea, Dr. Chaewoo Nam of the Korea Capital Market Institute told Asia Asset Management in an earlier interview: “Domestic hedge funds in their infancy expect investment from institutional investors rather than individuals. This is because a virtuous cycle will be created if pension funds equipped with strong due diligence and fund raising capabilities participate in the hedge fund market. Thus, public pension plans need to run pilot-tests by allocating small amounts of capital to hedge funds in order to nurture them and help them build track records.”
Dr. Nam says hedge funds can be useful to institutional investors. “For large pension funds that can allocate sizable capital to hedge funds in the early-stage of investment, these funds should consider investing in the hedge fund market through funds of hedge funds and at the same time strategically exploring a handful of singe funds. In this case, pension funds can employ the concept of optimal asset allocation among various hedge fund strategies for entire portfolios and maximise the diversification effect by relying on leading hedge fund advisers.”
Dr. Jongmin Kim, a senior researcher with the Korea Capital Market Institute (KCMI), told AAM: “Korean pension funds allocate 7.89% of their assets under management to alternative funds at present, but the prerequisite (for the growth of hedge funds) will be the existence of hedge funds with good track records and strategies relevant to pension funds.”
Dr. Kim’s research shows that the average percentage of investment by global pension funds into hedge funds is 6.5% – on this basis, the Korean pension fund industry should have the capacity to invest the equivalent of several billion dollars into domestic hedge funds, or a combination of domestic and foreign hedge funds.
The result of a low to moderate growth potential scenario for the Korean domestic hedge fund industry would still result in industry assets under management of between 5 to 13 trillion won (US$4.5 billion to $11.7 billion), according to Dr. Kim’s research. This would amount to between 1 and 2% of the amount of assets managed in the Korean unit trust funds market, which the KCMI projects will reach over 350 trillion won within the next five years.
These projections for the growth of local hedge funds are based on the correlations present in major global markets between the scale of the mutual fund assets and the hedge fund assets in these markets. There is no guarantee that the Korean case will mimic the results of the global markets, but if hedge fund managers are successful in producing alpha in difficult markets and in containing risks within the volatility limits of the major institutional investors, then the Korean hedge fund industry may have a chance.
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