Swiss fund-of-hedge-funds manager Gottex is teaming up with two former executives of Blackstone and Goldman Sachs to back Asian hedge fund managers starved of capital since the global financial crisis.
Gottex is entering a partnership with Headland Strategic - founded by Michael Garrow, an ex-Blackstone executive, and Johannes Kaps, who earlier worked at Goldman Sachs. It will offer hedge fund managers as much as US$75 million each from next year.
It aims to help them individually build start-up capital of at least US$100 million.
The scale of the initial financial backing is substantial. A typical seed investment in Asia has remained at about US$25 million in recent years.
Seeders usually pocket 20 to 30 cents of every dollar earned by a hedge fund in addition to their share of the return generated. Many smaller managers and those looking to start in Asia are willing to share revenues in exchange for long-term capital.
Gottex, via its partnership with Hong Kong-based Headland, plans to start seeding funds by the first quarter of next year and back two to three managers every year.
Gottex co-founder Max Gottschalk said the company saw enormous potential in Asia, where allocations to hedge funds remained underweight.
"The aim is for Headland Strategic to make fairly large day one investments," Gottschalk said.
"We want to help each fund launch with a minimum of US$100 million, a critical amount of capital for hedge funds to survive and grow in Asia."
The partnership has also roped in V-Nee Yeh, co-founder of Hong Kong-based money manager Value Partners, and other investors to commit cornerstone capital to Headland, Gottschalk said.
"Asian dedicated hedge fund assets have seen virtually no growth since the global financial crisis, creating an ideal environment for us to negotiate … with top-tier portfolio managers," Kaps said.
Three-quarters of Asia's 1,300 hedge funds manage less than US$100 million, according to data from tracker Eurekahedge.
Headland will compete with the likes of Woori Absolute Partners and Ascalon Capital, a unit of Australia's Westpac Banking, in seeding managers in Asia.
Asian hedge funds as measured by Eurekahedge returned an average 9.7 per cent in the first nine months of this year, outperforming a 1.4 per cent drop in the MSCI index of Asia-Pacific shares outside Japan.