Hong Kong’s economy is being battered and bruised as banks lay off high-earning staff and western private equity and hedge funds shut up shop and leave.
But as property prices retreat to reflect falling demand from top-paid earners, a new breed of value investors are being lured to town.
Duet, a London-based hedge fund and private equity investor that manages US$2 billion of assets, will launch a Hong Kong-based China Fund in the final quarter of the year. It plans to hunt for rich pickings in the mainland’s troubled real estate sector.
Co-chairman Henry Gabay said Duet planned to raise US$400 million from pension funds and wealthy individuals.
Duet is not a traditional vulture investor - the asset traders who buy distressed companies’ debt for cents in the dollar, wait for a bankruptcy settlement and then convert the loans into shares.
However, it is the latest in a line of similar investors setting up shop in Hong Kong and plans to hunt for cheap development land that cash-strapped property firms want to sell off quickly, potentially turning others’ pain into a gain.
Another is MCapital, founded last year by Mark Devonshire, Merrill Lynch’s former senior debt trader, who left Merrill to set up the firm to buy troubled companies’ loans.
Edwin Wong, previously the head of special situations investing at Lehman Brothers, has also started a hedge fund to invest in troubled businesses. He left Lehman shortly after it stumbled into Nomura’s arms last September.
Duet is likely to attract investors. It performed well last year, a time when most money managers plunged deeply into the red, recording a 3 per cent performance gain.
Mr. Gabay confirmed in an e-mail exchange that the money manager was launching on the mainland and would focus on real estate and other private equity opportunities, and wanted to raise “US$300 million to US$400 million”.
The shares of mainland property developers have crashed in recent months in parallel with the country’s slowing economic growth. Guangdong luxury home builder Hopson Developments Holdings, for example, has plunged 46 per cent since the start of the year and Zhong An Real Estate, which builds offices and hotels along the Yangtze River Delta, is down 35 per cent.
Vulture funds may not be to everyone’s liking, but they do employ laid-off bankers, import wealthy expats, and often restructure or inject cash into businesses that would have otherwise failed.
Mr. Gabay said it was too early to discuss hiring plans.
Western money managers are divided on their Asian strategies. Some, like Duet, see falling company valuations as an opportunity. But others are retrenching to their home markets as the global recession makes them want to cut costs.
GSO Capital Partners, which is owned by American buyout giant Blackstone Group, closed its local investment desk last month. American hedge fund Cerberus is also closing its Hong Kong office after less than two years in the city.
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British hedge fund eyes mainland real estate
Naomi Rovnick
9 March 2009
Hong Kong’s economy is being battered and bruised as banks lay off high-earning staff and western private equity and hedge funds shut up shop and leave.
But as property prices retreat to reflect falling demand from top-paid earners, a new breed of value investors are being lured to town.
Duet, a London-based hedge fund and private equity investor that manages US$2 billion of assets, will launch a Hong Kong-based China Fund in the final quarter of the year. It plans to hunt for rich pickings in the mainland’s troubled real estate sector.
Co-chairman Henry Gabay said Duet planned to raise US$400 million from pension funds and wealthy individuals.
Duet is not a traditional vulture investor - the asset traders who buy distressed companies’ debt for cents in the dollar, wait for a bankruptcy settlement and then convert the loans into shares.
However, it is the latest in a line of similar investors setting up shop in Hong Kong and plans to hunt for cheap development land that cash-strapped property firms want to sell off quickly, potentially turning others’ pain into a gain.
Another is MCapital, founded last year by Mark Devonshire, Merrill Lynch’s former senior debt trader, who left Merrill to set up the firm to buy troubled companies’ loans.
Edwin Wong, previously the head of special situations investing at Lehman Brothers, has also started a hedge fund to invest in troubled businesses. He left Lehman shortly after it stumbled into Nomura’s arms last September.
Duet is likely to attract investors. It performed well last year, a time when most money managers plunged deeply into the red, recording a 3 per cent performance gain.
Mr. Gabay confirmed in an e-mail exchange that the money manager was launching on the mainland and would focus on real estate and other private equity opportunities, and wanted to raise “US$300 million to US$400 million”.
The shares of mainland property developers have crashed in recent months in parallel with the country’s slowing economic growth. Guangdong luxury home builder Hopson Developments Holdings, for example, has plunged 46 per cent since the start of the year and Zhong An Real Estate, which builds offices and hotels along the Yangtze River Delta, is down 35 per cent.
Vulture funds may not be to everyone’s liking, but they do employ laid-off bankers, import wealthy expats, and often restructure or inject cash into businesses that would have otherwise failed.
Mr. Gabay said it was too early to discuss hiring plans.
Western money managers are divided on their Asian strategies. Some, like Duet, see falling company valuations as an opportunity. But others are retrenching to their home markets as the global recession makes them want to cut costs.
GSO Capital Partners, which is owned by American buyout giant Blackstone Group, closed its local investment desk last month. American hedge fund Cerberus is also closing its Hong Kong office after less than two years in the city.
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