Singapore investment fund Temasek Holdings has set up a new investment company called Seatown Holdings. According to the statement, Temasek’s senior managing director and chief strategist Charles Ong will be the chief executive of the new company. Mr Ong said Seatown is a global investment company, wholly-owned by Temasek Holdings. It is not immediately clear how Seatown’s mandate will be different from Temasek’s own investment role. Remember, Temasek’s investment mandate is to protect the monies of Singapore, including the pension monies (CPF) of its residents. Temasek set up Fullerton Fund Management a few years ago to manage 3rd party money. I suppose the real question to ask is how different would Seatown be from Fullerton Fund Management’s mandate. Or even, how different is it from GIC’s mandate? Some news reports say that in addition to investing the city-state’s own assets, Seatown will eventually open its doors to Singapore’s citizens, allowing them to co-invest with the sovereign fund.

I did some research and found a flowchart from this blog, where the author interpreted the money flow within this organisation. See the chart below (click on it for a larger version).

A spokesman said he had no further details beyond the statement. Temasek said it has seconded a small core team and is still in the process of building up the Seatown team. Earlier, Dow Jones reported that the new company will have an investment capital of around US$3 billion and would focus on investments in emerging markets with an emphasis on Asia.

South Korea’s Woori Investment & Securities Co Ltd has released a statement which says it is set to launch a $30 million fund-of-hedge-funds with Temasek’s Fullerton Fund Management, as part of a restructuring of its hedge funds business. Restructuring, after some reading, means closing down a $60m hedge fund and redeploying half of that money into a Fund of Funds product, which will be managed by Woori but investment advisory will be provided by Fullerton.

If you’re in the Asian (inc. Japan) equities long/short business, there’s probably $1mm to $2mm for you from this new FOF so go ahead, send your pitch books now!

1. Turnaround, Restructuring, Bankruptcy Specialist (VP level & Director Level), 6-7 years experience or more – New York
2. Infrastructure Analyst/Senior Analyst (Infrastructure Advisory firm) – Washington
3. Marketing/Communications Manager, 5 years plus experience – New York
4. HR Manager/Director (Generalist) 5-7 years experience, financial experience preferred – New York

If (and only if) you match the requirements and are interested in either of the roles above, drop me an email.

News wires around the world covered the story about RMF (a subsidiary of the Man Group) backing ex-Fortress manager, Stanley Ku. Interestingly enough, according to Hans Hurschler, head of Man Investments’ Hedge Fund Ventures, the hedge fund seeding business is now more like loaning money to a start-up than making a private equity-style investment. RMF will invest for only “a couple of years” – the official number is 3 years (source). That means within 3 years, Mr Stanley Ku will have to build his business, hire staff, invest profitably, and raise money (at least $50m). It’s a long shot, considering the markets, but thankfully for hedge fund managers, seed investors usually have a strong herd mentality.

Nobody (usually) wants to be the lead seed investor, but many will soon follow.  Herd mentality is strong amongst hedge fund seed investors. As with all larger seed investors, RMF Global Emerging Managers probably makes four or five seed investments each year. It would probably invest seed capital in the underlying hedge funds rather than the investment companies that manage them (usually in the form of a non-recourse working capital loan). Without a doubt, it will also agree to an arrangement sharing some of the underlying fund’s management and performance fees. I’m almost certain that other seed investors will be coming on to the bandwagon soon. Mr Hurschler however, is warning other seed investors not to take too much advantage of the current availability of hedge funds looking for seed funding.

Here’s my summary of what possibly attracted RMF to this deal:

1. Good pedigree - Stanley Ku used to work at Fortress and Goldman Sachs
2. Good reputation/branding - Stanley Ku is a “very well respected money manager in Asia”
3. Liquidity & Transparency - The fund invests in highly liquid assets (mainly G7 Government Bonds and related highly liquid products with fully transparent pricing), and the entire portfolio is designed to be liquidated in 48 hours
4. Strategy - Fixed-income arbitrage
5. Team - Experienced team, and history of working with each other (The 8 seasoned team members have 127 years of combined industry experience, 94 of which have been spent working together.) [p.s. I really don't understand the purpose of considering the number of years of "combined industry experience". What is the industry norm? If there were 2 managers with 30 years experience each, does it give 50% less brownie points than a team of 8 with a combined industry experience of 127 years, even though the smaller team's average industry experience is 100% more?]

About RMF Global Emerging Managers

• It’s a relatively new seeding fund, and its launch was covered in the media in November 2007 (Google search link)
• The fund targets entrepreneurial managers with substantial hedge fund management experience whose operations have good growth prospects and solid operational infrastructure. (source)
• The fund aims to deliver hedge fund returns enhanced by revenue-sharing schemes with the managers; in addition to delivering performance returns, the managers will share with investors a fixed proportion of their gross revenues for a defined period. (source)

(Some) Terms of the Deal (source)

• Certain beneficial rights not available to other investors (rights to further investments? redemption rights? etc.)
• Ability to run shadow risk management and fund administration systems
• Most Favoured Nation status
• Share of the performance allocations (on gross performance? probably…)
• Man will not be able to redeem its investment from 5:15’s fund until June 30, 2011
• …and more!

Keeping a look out for other seed investors now… something’s definitely brewing!

Here’s an article I extracted from THFJ which I find a good read for those of you out there looking for seed investors.

FRM`s Patric de Gentile-Williams comments on the current state of hedge fund seeding

• - The environment for hedge fund seeders has changed dramatically over the last 12 months
  - There are now fewer seeders in the market
  - Even established funds are looking for seed capital after redemptions have hit their funds
  - Some start ups have suffered as their original seeders have withdrawn from the market
  - Investors are more stringent than ever before on issues such as corporate governance, use of third party administrators and transparency

Just as some investors pulled assets out of the hedge fund industry in 2008, the amount of capital and the number of firms in hedge fund seeding also reduced. However it is important to stress that this reduction is due to stresses in the parent businesses of the seeders not in the seeding business itself. Today far fewer players are active in providing seed capital to hedge funds. This, combined with the increased difficulty that hedge funds face in raising capital, has created a favourable environment for the remaining seeders.

The full article can be found here