Funding Available for both Private and Public Companies

Dec 17, 2009 by

istock_walkinpark_500

Private Companies

  • We seek private companies with a minimum of USD$2 million in EBITDA.
  • We are open to all sectors and geography.
  • If your company is not yet cash flow positive we can provide a legally binding comittment to invest all the money you need once you  are listed. You can then leverage that into an IPO/RTO which we can facilitate as well.

Public Listed Companies

We seek listed public companies and the investment criteria list adopted by us is as follows:

    • You can achieve significant public announcement milestones during the developmental period.
    • You determine when you take the capital as and when you need it.
    • You use the proceeds to grow your business and your EBITDA.
    • Your funds are spent over a developmental period.

      If you believe you fit our funding criteria a review and analysis of your business plan will be required as the next step. Please contact me directly.

      read more

      Related Posts

      Tags

      Share This

      Temporary Arbitrage Opportunity – Life Settlement Policies

      Dec 16, 2009 by

      old people

      I am in contact with an industry pioneer that controls the bid process, compliance, due diligence, and facilitates life settlement transactions for insurance companies, agents, registered representatives, and their affiliated broker/dealers.

      Currently some policies are not receiving bids due to tight credit markets and lack of liquidity from institutional funders, creating a temporary arbitrage opportunity. This allows policies to be cherry picked and purchased at substantial discounts just above cash surrender value. They currently have a portfolio of 43 policies, w/ face value of $155M, and average age 77 that can be purchased for about $7M.

      Any interest? Contact me now. This is a very short-term temporary opportunity.

      read more

      Related Posts

      Tags

      Share This

      Interested in India and a successful statistical arbitrage strategy? Here’s an opportunity.

      Dec 15, 2009 by

      india

      I was recently contacted by a fund manager running a sector and dollar neutral  statistical arbitrage model in the Indian market. They are currently running exposures of USD 3 million, by Dec ’09 they’ll have 6 months under the belt. They have had no down months with low correlation to the market.

      The managers are now looking to do this in bigger size and looking for interested parties like asset allocators, bigger hedge funds and seed investors.

      If you would like more info about this opportunity, drop me a note. On a different note, if you are a service provider and think you have a great deal for this manager, feel free to contact me and I will put you through.

      read more

      Related Posts

      Tags

      Share This

      New Appointment at the Singapore Business Council (UAE)

      Dec 1, 2009 by

      A brief update.

      logoI was recently appointed as the President of the Singapore Business Council (UAE). The vision of the Singapore Business Council (UAE) is to be the focal point for Singaporean entities and individuals seeking opportunities with other entities in the Gulf, and also to assist in positioning Singapore as a base for foreign businesses to expand into, in partnership with Singaporean entities and individuals.

      If you are in Dubai, drop me a note (felix@felixsim.com) and I’ll be happy to meet up if time suits.

      read more

      Related Posts

      Tags

      Share This

      Watch it, or go Broke.

      Aug 28, 2009 by

      Broke

      Guts. That’s probably the correct word to use to describe someone who comes up with a provocative yet very real film about the tough times we’re in today. In Broke, Michael breaks the problem down into digestible pieces, through interviews with people on the street, industry professionals, and academics. He answers the question “Why do some people make money, and others lose” by interviewing the best in the industry. He interviews experienced investors such as Jim Rogers, and academics such as Harry Markowitz and Dr. Vernon Smith. Michael even interviews poker players!

      Guts. That’s probably the correct word to use to describe someone who comes up with a provocative yet realistic film about the present world that’s crumbling around us, and the sad future that’s awaiting us if we continue to act the same way.

      In Broke, Michael breaks the problem down into digestible pieces, through interviews with people on the street, industry professionals, and academics. He answers the question “Why do some people make money, and others lose” by interviewing the best in the industry. In typical Michael Covel fashion, he interviews and borrows the experiences of heavyweight investors such as Jim Rogers and Mark Mobius, and academics such as Harry Markowitz and Dr. Vernon Smith. Michael even interviews poker players!

      Like sheep, Michael reminds us in Broke that we’re all constantly faced with tough decisions, and that it psychologically feels better to be with others than to be alone – even if the crowded is wrong.  Investing in Real Estate with no money down, believing and supporting State Capitalism, and listening to the Media are taking us down Broker Avenue, and in the film Michael finds people who know what they are talking about to explain to the viewers, why.

      A scary thought and reality that is emphasized in Broke, is that a huge number of people around the world depend on the lottery to make enough money for retirement. A larger number also invests in mutual funds. Interestingly, Michael draws a parallel to playing poker or investing in hedge funds, where one would have a higher probability of winning (i.e. making money).

      Michael has once again touched the right nerves by producing Broke to remind us all of the realities of life, as a lesser, kinder message would not be put across and taken seriously. The price of the Broke DVD ($19.99) is probably less than the daily average of how much each person spends on lottery tickets. Watch it, or you will be broke. It’s more than just a bedtime movie.

      Broke can be purchased directly from www.brokemovie.com.

      P.S. If you live in the UAE (Dubai, Abu Dhabi, etc.) and would like me to organize a mass order to save on shipping, please drop me an email.

      UAEfelix@felixsim.com

      read more

      Related Posts

      Tags

      Share This

      RMF Global Emerging Managers seeding fund backs Stanley Ku

      Aug 23, 2009 by

      sowingNews 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!

      read more

      Related Posts

      Tags

      Share This

      Current state of hedge fund seed investors

      Jun 14, 2009 by

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

      _seed_of_green__by_aendrwFRM`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

      read more

      Related Posts

      Tags

      Share This

      Book Review: Michael Covel’s Trend Following (Updated Edition)

      Apr 29, 2009 by

      Trend FollowingDespite the new book cover, Michael Covel’s updated Trend Following book doesn’t horse around.  When I received my copy in the mail, my first thoughts were “Ok, here we go again…. another trend trading book…” BUT WAIT! The first 10 pages immediately changed my mindset, in typical Michael Covel fashion. Micahel went straight for the kill, no bull, by saying that this book was not going to teach you any trading strategy in particular, nor was it going to show you how to read charts (or tea leaves). Rather, the book highlights and discusses the most important points that both traders and fund managers tend to overlook when they trade the markets – Trend Following and Price.

      Go with the flow or drown in the flood is really the best way to describe what Michael highlights in his book.

      If you’re a Market Wizards fan, you’re definitely going to like the interviews and case studies that Michael puts in this book. Just the case studies and interviews conducted by Michael inTrend Following (Updated Edition) is akin to Market Wizards on steroids. There is so much data in this book that an amateur would miss if taken lightly. The case studies, side bar quotes, and the personal stories and philosophy of successful trend followers are extremely good reads and useful in a trader’s business. Fund managers and investors would also find this book a good read, as it explains reasonably well the reason why most lost (a lot of) money in 2008.

      Learn more about the book and the other interesting stuff Michael has on his website, http://www.trendfollowing.com/

      read more

      Related Posts

      Tags

      Share This

      A Day in the Life of a Hedge Funds Investor Relations Officer

      Feb 12, 2009 by

      Update (July ’11): I am now open to taking on new clients who wishes to outsource their Investor Relations works. Drop me an email: felix@felixsim.com.

      I was reading through some career portals (no, not looking for a job) when I came across an old article on Vault.com.

      It talks about how Investor Relations people spend their days in the office (if they’re ever in the office). I also have a short comment on it after the article extract so read on.

      catA Day in the Life: Hedge Funds Investor Relations

      7:00 a.m.: Arrive at the office, read The Wall Street Journal on the way into work to brief on current events in the market. Read industry magazines/journals to find out the latest news.

      8:00 a.m.: After having coffee and bagel, check e-mails and phone messages from clients. Respond to client’s questions concerning performance of the fund and general market conditions.

      9:00 a.m.: Work on writing the monthly newsletter. This involves getting all the analytics of the fund, which are obtained from the operations manager. It also requires the fund manager to summarize market conditions for the month and indicate which of the firms’ securities were impacted and which were not. You assist the fund manager in gathering the market data.

      10:00 a.m.: Get called into a meeting with a potential investor by the hedge fund manager. Present the terms and conditions of investing with the fund  lockup periods, minimum investment, etc. The manager has already gone over the returns of the fund and his investment philosophy.

      11:30 a.m.: Leave for a lunch in Midtown with an existing investor in the fund. This lunch was arranged to discuss a potential investment in a new fund that we are launching. Over lunch, you discuss the existing performance of our fund, general market conditions and what differences the new fund would mean to his portfolio.2:00 p.m.: Arrive back from lunch to many e-mails and voice messages. Respond to the e-mails, and continue to write the monthly newsletter,.researching the macro economic conditions for the past month.3:00 p.m.: Speak to capital introductions group at a leading prime broker to discuss their next conference and to see if the firm can present at it. The conference is full for speakers, but the firm will attend.

      4:00 p.m.: Arrange meetings with potential investors for the fund manager. Continue with the monthly newsletter  this usually takes a few full days to complete since the coordination of the different departments can be timely.

      5:30 p.m.: Leave for a dinner in Midtown with a potential investor in the fund and the hedge fund manager to discuss the investor’s potential investment into a new fund the firm is launching. Over dinner, you discuss the existing performance of our funds, general market conditions and what investing in the new fund would mean to his portfolio.

      8:00 p.m.: After dinner, grab a cab home and crash.

      In down times like the one we are in now, will you (hedge fund manager) be willing to employ someone like the above? If not, who else will support your Investor Relations function? Will you go back to doing it yourself? Sure that sounds like a plan. Now, who will manage your portfolio? You know what I am getting at. I have come across so many fund managers who tell me the same Catch-22 situation they are in, day-in, day-out. Here’s one: “We want to hire an IRO but we’re not big enough, but we know it is an important function to have as I want to spend my time managing the portfolio and following-up with investors, not the prospects. I’d also rather spend 2 hours talking to a company or to an investor than to take that time to design my weekly newsletter and mail it to my mailing list of 2,000 prospects. Yet, it all comes down to the dollars, we cannot afford a full-time IRO!

      Does this sound familiar to you? I can help. Send me an email with your requirements: felix@felixsim.com.

      Felix

      read more

      Related Posts

      Tags

      Share This

      Death Notes (Bonds)

      Feb 5, 2009 by

      Death NoteWhen Takeshi Obata wrote the Japanese Comic (Manga) “Death Note”, I’m sure he wasn’t expecting the financial industry to take that up literally. A “Death Bond”, by definition, is a security backed by life insurance which is derived by pooling together a number of transferable life insurance policies. Similar to mortgage-backed securities, the life insurance policies are pooled together and then repackaged into bonds to be sold to investors (Source).

      I thought it interesting to learn that Davidson Kempner Capital Management, a $10 billion New York-based fund, is planning on selling “death bonds” to overseas investors. This basically means that the bonds will be backed partially by the death benefits the hedge fund is entitled to collect on the life insurance policies it acquires. Speculators like Davidson buy insurance policies at a deep discount to their death benefit and continue to pay the premiums—betting the seller will die before the policy terminates!

      Once life settlement providers buy a person’s life-insurance policy, they would then resell the policy to hedge funds or investment banks who accumulate 100 to 200 policies before packaging the warehouse of policies into asset-backed securities, or Death Bonds. Returns on Death Bonds are estimated by the industry to be around 8%.

      Davidson is not the only one to have eyes on this market though. Goldman Sachs, Bear Stearns and Lehman Brothers also seem to be charging ahead to create a market for these Death Bonds.

      How’s that for an alternative investment with low correlation to the markets?

      .Felix

      read more

      Related Posts

      Tags

      Share This

      Green Investing – Hot, Flat and Profitable

      Jan 8, 2009 by

      Image ©2008-2009 ~aremanvin

      Hot, Flat and Crowded tells us what we already know and should be doing to save our planet, but some professionals in my network of professionals (I run a number of groups on LinkedIn, take a look at the Green Investors Group) have already started to take action before this book was written by Mr Friedman.

      Take for instance this one:

      We have a company that is producing community sized solar powered water treatment plants (Red Bird) and other sustainable waste water, and remediation technologies. Over 3 million in gross revenue, cash flow positive and profitable.

      Or:

      We have a zero-emission, closed loop generator that simultaneously creates electricity, water, and heat. There’s nothing like it on the market.

      And:

      And a Power Playground that uses children’s energy to create electricity and pump purified water.

      If  you’re an investor out there who’s interested to put your money to work whilst saving the planet (Thank you), these opportunities might be of interest to you. Feel free to drop me a line (felix@felixsim.com).

      read more

      Related Posts

      Tags

      Share This

      Activist Investments in Asia

      Dec 20, 2008 by

       Activist investing!Perhaps luck was not on your side during the last 12-months; you may not be in a sufficiently liquid position today to take advantage of these opportunities. However, if you are, then these are the types of opportunities that would make a rational investor weak-knee’d in normal times (if only to have one opportunity—but here are ten!)

       These opportunities are not for everyone. However if you are a corporate player seeking to make strategic acquisitions, high net worth individual with staying power, or a family offices seeking fund strategies that will work across the next cycle—these concepts may be interesting for you. Deploying a selective activist agenda would accelerate returns and add extra value to these scenarios. A common theme linking most of these opportunities is that you are generally buying in at a significant discount to net cash; you are buying $1.00 in cash for as little as 10 cents on the margin! A majority of these examples are also minority owned—it means that with sufficient capital, activism can work. You can push an agenda to improve minority shareholder performance thru increased dividend payments, stock buy-backs, better project returns, etc.

       

      1. Property Company

      Net cash & Liquid assets of US$50m +
      Property Portfolio of US$70m; NAV US$140m
      Peak market cap US$190m, now US$8m!
      2012 Target Market Cap US$90m > 1000% return…
      Activist Play: Buy 30% over six months for US$8m; unfold
      activist strategy; 2 year returns +400%

      2. Property Company
      Net cash of US$200m + Property Portfolio of US$300m;
      NAV US$600m
      Peak market cap US$1.3bn, now US$40m!
      2012 Target Market Cap US$500m > 1000% return…
      Activist Play: Buy 30% over six months for US$22m; unfold
      activist strategy; 2 year returns +400%

      3. Property Company
      Net cash, shares & receivables US$60m +
      Properties of US$10m; NAV US$100m
      Peak market cap US$400m, now US$8m!
      2012 Target Market Cap US$90m > 1000% return…
      Activist Play: Buy 30% over six months for US$7m; unfold
      activist strategy; 2 year returns +400%

      4. Textile Company
      Net cash US$65m + 2009-2012 EBITDA range US$10-30m; NAV US$160m
      Peak market cap US$160m, now US$14m!
      2012 Target Market Cap US$150m > 1000% return…
      Activist Play: Buy 30% over six months for US$12m; unfold activist strategy; 2
      year returns +400%

      5. Chemical Company
      PE 1.3x 2008 + EPS growth of 150% to 2012 ; Dividend Yld >25%
      Peak market cap US$125m, now US$38m!
      2012 Target Market Cap US$420m > 1000% return…
      Activist Play: Buy 25% over six months for US$18m; unfold activist strategy; 2
      year returns +400%

      6. Coal Company
      DCF valuation US$300m; assuming coal prices fall 40% from current levels;
      2012 P/CF 0.5x
      Peak market cap US$50m, now US$5m!
      2012 Target Market Cap US$150m > 1000% return (building in 50% dilution)
      Activist Play: Buy 30% over six months for US$5m; unfold activist strategy; 2
      year returns +400%

      7. Cash Box Company
      Net cash of US$35m + Resource Concessions ; NAV US$80m
      Peak market cap US$100m, now US$4.0m!
      2012 Target Market Cap US$45m > 1000% return…
      Activist Play: Buy 30% over six months for US$5m; unfold activist strategy; 2
      year returns +400%

      8. Gaming Company
      PE 2009 0.5x ; DCF value range US$175m; Dividend Yld 50%
      Peak market cap US$500m, now US$13m!
      2012 Target Market Cap US$150m > 1000% return…
      Activist Play: Buy 30% over six months for US$8m; unfold activist strategy; 2
      year returns +500%

      9. Building Materials Company
      PE 2008 0.8x ; PE 2012 0.5x ; 2012 Dividend Yld 100%
      Peak market cap US$35m, now US$9m!
      2012 Target Market Cap US$100m > 1000% return…
      Activist Play: Buy 30% over six months for US$6m; unfold activist strategy; 2
      year returns +400%

      10. Power Producer Company
      PE 2008 1.6x ; PE 2012 0.5x; 2012
      Peak market cap US$2.7bn, now US$65m!
      2012 Target Market Cap US$1.3bn > 1000% return…
      Activist Play: Buy 25% over six months for US$35m; unfold activist strategy; 2
      year returns +400%

      If you are interested in any of these opportunities, contact me at felix@felixsim.com.

      read more

      Related Posts

      Tags

      Share This

      The Financial Onslaught in Singapore

      Oct 19, 2008 by

      The Monetary Authority of Singapore (“MAS”) classifies investors into 3 classes under the Securities and Futures Act – “accredited investor”, “expert investor” and “institutional investor”. There is no classification for retail investor specifically, and generally all other types of investors fall under this classification. The banking sector has been hit hard all around the globe, including Singapore. However, a key difference in the drama in Singapore’s financial sector from other countries’, is not due to bank closures but to individuals (retail investors) losing their life savings by investing in an instrument that was one thought to be untouchable by any market downturns –Lehman Brothers Bonds that were rated A1 by credit-rating agency Moody’s as late as July 2008. Who were the victims of this onslaught and how were they exposed to these instruments in the first place? Are there other investments that the same investors are exposed to and are they aware of the risks of those investments? How can the MAS find the middle ground it needs to prevent something similar from happening again, without over-regulating the financial system in Singapore?

      Mr Tharman Shanmugaratnam, the Finance Minister of Singapore was recently quoted as saying ‘The MAS approach is one that balances regulation with responsibility on the part of the institution and the investor. All three play a part, and in all three areas, I’m sure there can be improvements, coming out of the recent problems.’

      The Issue

      The Monetary Authority of Singapore said about 9,700 people had bought Lehman-linked structured notes worth over S$500 million, and due to the recent Chapter 11 bankruptcy filing by Lehman Brothers, investors in these notes would lose most of their investments. Recently, about 600 investors in Lehman-linked derivatives held a public meeting in Singapore to protest about the way banks sold them the investment products and to discuss ways to get compensation, according to news sources. The problem with Singapore’s financial system is the way financial instruments are being sold and the way sales people are trained and motivated to sell them.

      Quoting from the same source:

      ‘They never told me the issuer was Lehman and I told the manager I was afraid of American banks,’ said Ms Lin Ling, who bought S$60,000 worth of Lehman-linked ‘Minibonds’ from a Singapore finance firm that had marketed the structured notes as a safe alternative to fixed deposits.

      ‘I didn’t know it’s Lehman. There’s no Chinese explanation,’ said a lady in her 60s who identified herself as Madam Lee. ‘I don’t want interest, I just want my deposit back.’

      Observations and Lessons Learnt

      Passing the buck to another is always a convenient way out of trouble and that appears to be the route taken by many of the investors hit by this Lehman debacle. There should never be a doubt that there is a risk in every investment. By law, all financial advisors (“FA”) in Singapore are required to sit for and pass a number of Code of Ethics exams before they are allowed to give any form of financial advice. Without diverting this discussion into the effectiveness of the syllabus of these exams, we assume that passing these examinations shows the FAs’ abilities to understand the concept of risk, client classification and the different investment goals of different clients. There is no requirement for these FAs to be able to identify a high risk/return investment product before being let loose on the streets to peddle their products. What does this implicitly tell anyone aspiring to be a FA? Simply, it defines the minimum standard that these FAs need to fulfil, which is their knowledge of the law that governs marketing financial products in Singapore. Armed with this knowledge, FAs then gradually pick up product knowledge from their supervisors and colleagues, many of whom took the same path as them years ago.

      What is the role of a FA? No matter how one argues, the FA’s role is to sell. It is not to “help clients manage their risk” or to “help clients save for a better future” – it is to “reach the sales quota to get paid”, “get on the millionaires’ roundtable to be seen and admired by your peers”, “be the first to sell a million contracts and win a holiday to Europe”, etc. Psychologically, FAs are not cultivated to be risk-adverse, they are by the nature of their motivation driven to take more risks, resulting in them advising their clients to take on more risks.

      A Linear Solution to an Exponential Problem

      Currently, FAs are paid a basic salary (terms and conditions apply) and a bonus based on the amount of sales generated by them. Any good salesman with little or no education would be able to fulfil this role. Alternatively, imagine if FAs were rewarded by how much money their clients made, this would immediately motivate them to do a few things:

      1. Get a proper financial education;
      2. Learn the concept of portfolio management and learn the instruments and how they can work for/against an investor; and
      3. Think twice before selling an investment product.

      Relate this to fees made by professional fund managers. Fund Managers are paid a basic salary (management fees) derived as a percentage of assets under management. When they make money for their investors (clients), they are rewarded a certain amount of performance bonus. Should they lose money or break-even for their clients, they would only be given their management fees which are sufficient to keep them in the business but not enough for them to retire on a 20-ft yacht. MAS should conduct a survey on all the FAs in Singapore, the result of which should tell the employers of FAs (Financial Institutions, or “FI”) how they can structure the basic salary of FAs in order to keep them in the business, based on their demographics. Analysing this information with past client data, FIs can then also structure a rewards table for FAs whose clients perform well. Without tagging the reward of FAs to clients’ portfolio performance, it is unfair to blame FAs for the recent losses of Singaporeans who invested in the Lehman bonds, since FAs were not rewarded for any gains derived from investing in these bonds either.

      Summary

      In conclusion, the recent financial turmoil in Singapore defined as individuals losing their live savings rather than financial institutions closing down, is a clear indication of a weakness in the regulatory system. This weakness is caused by a psychological problem – motivation of Financial Advisors in Singapore – rather than by a technical problem in the financial system. The solution to this is for the Monetary Authority of Singapore to conduct a survey on every Financial Advisor in Singapore, and release the results of this survey to all the Financial Institutions who are licensed to sell investment products to retail clients. MAS should also issue Guidance to these Financial Institutions on how they should revamp their reward structure, the result of which would improve the entire financial advisory industry in terms of knowledge and monetary reward.

      Felix.

      read more

      Related Posts

      Tags

      Share This

      Fund of Funds – The Bridge That Never Was (Part 2)

      Oct 14, 2008 by

      Back in May this year, I wrote a post about Funds of Funds and how they were little more than an additional layer of fees for their investors. In recent market mayhems, Funds of Funds were expected to prove themselves and provide the un-correlated returns of the markets, due to their arguable diversification abilities.

      It does look like I’m not the only one raving about the gloomy outlook for Fund of Funds operators. The Wall Street Journal recently reported that Fund of Funds have fallen about 11 percent in value. Eurekahedge’s Global Fund of Funds Index is down a shocking 11% YTD as of the time of this post, performing worse than the EH Asian Index which is down 9.85%. It’d be really interesting to see an FOF operator convince potential/existing investors about their lower volatility relative to the single funds’.

      Something interesting appears to be happening in the FOHF scene though, something innovative. Hedge Fund news websites reported that Permal Investment Management Services launched a Fund Of Funds to buy shares in hedge funds at sizeable discounts (25 to 30%) to their market value as more investors become distressed sellers.

      read more

      Related Posts

      Share This

      All work and no play…

      Oct 14, 2008 by

      Stefan Nielson over at the Tokyo Hedge Funds Club is putting together another signature year-end party for hedgies in the Land of the Rising Sun. The event is strictly by invitation only, and is organised specially for  for hedge fund managers and investors at the exclusive Roppongi Hills Club. Confirmed sponsors include CME Group, J.P. Morgan TSI International and Fidessa.

      For more information, please contact the Tokyo Hedge Funds Club at tokyo@hedgefundsclub.com or visit http://www.hedgefundsclub.com.

      read more

      Related Posts

      Share This

      Where can I find Seed Investors?

      May 29, 2008 by

      Original Image @ http://flickr.com/photos/nealf/2326555029/From my experience working with emerging hedge fund managers and especially from a recent Terrapinn conference I attended as a speaker, I discovered a very grave question raised by aspiring hedge fund managers:

      “Where can I find Seed Investors?”

      This question is prima facie an innocent, practical question that one must ask prior to starting a hedge fund business. Looking deeper however, I realized that individuals who ask this question are all set to build a house of cards, not a long-term business. Seed investors are everywhere. Your family, friends, colleagues, ex-boss, ex-wife, heck, even you could possibly be your own seed investor. By my definition, a seed investor is anyone who provides significant risk capital to a new venture. To be much more precise, institutional seed investors typically are made up of Funds of Funds, Family Offices and High Net Worth Individuals, more so than pension and endowment funds.

      A point that I feel must be put across to emerging fund managers is this:

      “It is as important for you to select and monitor your investors,

      As it is for your (potential) investor to select and monitor you.

      The same laws of the markets that govern hedge funds also govern their investors. It is important for emerging managers to compare and constrast the various investors available to them, by comparing the investment size, time horizon, deal structure and the business sustainabililty of the investor. This is especially important when selecting a seed investor. Depending on the expertise of the team put together by the Emerging Manager, the requirements from seed invesotrs will range from operational support, marketing support, risk monitoring support and so forth. It is important that such support is provided for the right reasons (i.e. provided because the Emerging Manager actually needs such support, and not because the seed investor requires it by protocol).

      A thin line separates between “value-adding” and “getting in the way”. Regardless of the deal put together, the Manager must seek to maximize the control he has on his business (read: not his investor’s business). Nobody – not even the seed investor – knows his portfolio better than the Manager does. Will having an institutional seeder influence the investment decisions of other investors? As long as herd behaviour drives the human society, this will always be true.

      Felix.

      read more

      Culture hedge

      May 20, 2008 by

      Source: http://flickr.com/photos/jasohill/118616905/This article was first conceived by a thought of mine that, among other things, culture differences within the ranks of a hedge fund company could possibly influence the performance of the fund. Rather than subjecting myself to being a participant in the ongoing statistical warfare, this article’s topic was switched from one that would be subject to personal objectivity, to another that is more impartial. What I seek to share in this article is the (possible) presence of cultural conflicts within hedge funds and their management companies in Asia, and some negative implications these conflicts may bring.

      Investors and academics have always challenged themselves (and each other) with the Herculean task of identifying the “best” hedge fund. How is performance determined? How does one consider the risk a hedge fund is exposed to? Does understanding the strategy equip one with the capabilities to predict either of these factors? As the industry matures, investors and academics have also grown. Experts have moved on and determined that even having a complete understanding of the quantitative scores of hedge funds (who are mostly un-regulated pools of investments, relative to their mutual fund counterparts) is insufficient to warrant an investment. Some experts assert that operational weaknesses cause easily as much trouble for hedge funds as do market stresses. Others have gone ahead to write papers on the topic of managing the operational risks of hedge funds.

      As indisputable as it is that both quantitative and qualitative components of a hedge fund contributes directly or indirectly to its performance and sustainability, one must not ignore the genesis of it all – the people behind the fund. For the purpose of completing this article, I conveniently assume that hedge funds are usually made up of at least two people, and the people managing hedge funds, like any other person on the street make decisions based on memory and reasoning. And like you and I, these people’s decisions are influenced by their culture. The Founder and Chair of EIM Group, Arpad Busson, rightfully said in an interview with Newsweek: people are at the heart of every success.

      Hofstede’s Cultural Dimensions

      In the late seventies, as an anthropologist from the Netherlands, Geert Hofstede conducted in-depth surveys and interviews with a large number of employees working for IBM in 53 countries. Using standard statistical analysis on his findings, Hofstede determined patterns of similarities and differences among the responses. He then formulated his theory that cultures around the world vary along consistent dimensions:

      • Power Distance Index (PDI)
      • Individualism (IDV)
      • Masculinity (MAS)
      • Uncertainty Avoidance (UAI)
      • Long-Term Orientation (LTO)

      Power Distance Index

      A hedge fund management company with high PDI may have in place a more rigid investment process, with possibly a single fund manager making the final investment call. When analyzing such companies, it may be useful to focus one’s attention to the expertise and responsibilities of the individuals in the higher ranks of the hierarchy. Problems may brew unexpectedly if the “alpha males” are no longer regarded as competent by other members of the company. Problems could range from basic employee frustration to employee turnover. Companies with high PDI may also be more prone to key man risk, relative to companies with low PDI. Information integrity may also be an issue, as it may be possible that all information provided to external parties will first be filtered by a senior member of the company. If one has a preference for analysis through interviews with lower-level employees within a hedge fund company, this may pose as an obstacle.

      Individualism

      Hedge fund companies whose employees are mostly individualistic tend to risk a lack of communication and possibly introduce unnecessary misunderstandings which may affect the daily operations of the hedge fund. Depending on the role of the individual, however, individualism might not be a negative culture. For example, the marketing person may have a highly-individualistic culture without causing trouble to the running of the hedge fund. However, if the trader is an individualist, one can only imagine the risks that may bring. A research on motivation says that effort and performance are a function of both the outcomes individuals anticipate will result from them performing an act and their efficacy expectations. If key decision makers within the company are mostly individualists, subordinates may not be properly rewarded hence once again causing discontent, bringing with it all possible disasters.

      Masculinity

      Generally, this dimension affects little in the management and continuity of a hedge fund except in instances of funds who have large gender dispersions, or funds who are managed by women. This may pose some risk as the other members of the team may not respect her enough to follow her operational procedures. Being a woman in a senior management level in a team that is high on the masculinity index may also pose a threat to teamwork in general.

      Uncertainty Avoidance

      It is natural for humans to avoid situations in which we are made to feel uncomfortable, and our cultural perceptions and expectations control our degree of desire in which we seek to avoid these uncomfortable situations. Form a qualitative due diligence point-of-view, a high uncertainty avoidance measurement gives an analyst some assurance that the hedge fund will operate the way it promised to operate in their initial pitch. A trader and/or fund manager with high uncertainty avoidance is less prone to change their trading/investment strategies (style drift), whereas one with a lower uncertainty avoidance may be more likely to do so.

      Long-Term Orientation

      Hedge fund companies with a higher LTO tend to take a longer view on most things, including the hiring of staff and the performance of their fund(s). They may pay more attention to their longer term performance rather than the short term performance (yearly performance rather than monthly performance), relative to hedge funds that have a lower LTO. Hedge fund companies with a higher LTO may also pay more attention to building up their business infrastructure and may choose to strengthen their middle/back-office staff before the front-office staff. Comparatively, low LTO hedge funds may be more focused on the nearer term and probably will put more emphasis on strengthening their research and front-office staff.

      Conclusion … yet another evolution in the alternatives investments industry

      Qualitative analysis is more of an art than a science. Typical qualitative analysis is done using the industry-accepted AIMA generic operation due diligence questionnaire for hedge fund managers. While these questions are arguably well-structured and covers most qualitative aspects of managing a hedge fund, an analyst should view each hedge fund company (and their employees) from a cultural perspective. Doing so makes the analysis process more effective and applicable, rather than a “cut-and-paste” task.

      Felix.

      read more

      Related Posts

      Share This

      Journey to the (Middle) East

      May 11, 2008 by

      Middle East economies are booming (no pun intended).

      Leaders of the Sheikdoms have decided their nations need to be less dependent on oil and have begun massive investment in the attempt to diversify the local economy. A small pool of international hedge funds have already entered into the markets by launching regionally-focused vehicles. The Abu Dhabi Investment Authority, Kuwait Investment Authority and Qatar Investment Authority are among a group of Middle East funds with assets estimated to be worth $1.5tn.

      The Boston Globe earlier this month reported that recently, partners from major US private equity firms flew to Abu Dhabi, Kuwait, Saudi Arabia, and other destinations in the region to court wealthy investors. For all but a few, this is brand new territory. And it’s paying off: Billions of dollars from the Middle East have poured into these funds over the past six months, and more is being pledged.”

      Bader Mohammad Al-Sa’ad, managing director of the Kuwait Investment Authority, which manages $250 billion, said he expects money from the Middle East to keep flowing into US hedge funds, even with the recent slowdown in buyout deals. “With this crisis, we’re going to see private equity firms going back to the basics,” and perhaps using less leverage, he said in an interview. “We’ll see a lot of opportunity.”

      In the Middle East, a tenet of Islamic finance remains a bar on selling something you do not own, tearing away one of hedge funds’ main tactics: shorting companies and using leverage. As the credit crunch and stock market meltdown hit markets around the world, investors outside the Middle East are now beginning to look for investment vehicles with healthy returns that are based in stable environments.

      Structured products based in the Middle East, particularly hedge funds, are perfect examples.

      Bahrain leads the region with 57 funds worth around US$2.6 billion, and Dubai is determined to establish a competent global hedge fund centre.

      As global investment banks flock to the region, they have started to provide synthetic, OTC products that fund managers can use to mimic shorting stocks, through transactions such as equity swaps and other derivatives.

      Regional players have started to utilize these hedging tools to cultivate the green shoots of a hedge fund industry, finding counter-parties in institutions such as Deutsche Bank, Merrill Lynch and Credit Suisse. Citigroup’s decision to relocate Alberto Verme, the co-head of its investment banking unit in London to Dubai, is the latest in a line of high-profile transfers to the region.

      When will you begin your Journey to the (Middle) East?

      Felix.

      read more

      Hedge funds – coming to a billboard near you!

      May 7, 2008 by

      The A word. A word that hedge funds are always quick to disassociate themselves with, for fear of a regulatory backlash. While many argue that hedge funds are no different from a regular business considering the presence of risks and rewards, regulators seem to think otherwise. The SEC thinks that hedge funds should not market themselves to potential investors, unless those potential investors agree to a declaration form that is too long. Many hedge funds have hence moved to password-protect their websites so that only pre-screened visitors can access performance details. The rationale? Showing performance numbers are seen as solicitation of investors, regardless of whether they are positive or negative numbers. Interesting.

      News reports have recently been publishing articles on the chronicles of Phillip Goldstein, who two years ago successfully sued the SEC and overturned a rule requiring hedge fund managers to register as investment advisers. Goldstein is now reportedly planning to sue the regulator to lift its ban on hedge fund marketing and advertising. While it does seems like a long shot to victory, at least someone’s trying to faciliate the evolution of the alternatives industry. One point I made on the NYTimes blog that carried this article, was the fear that even if Goldstein wins the suit, he will only have won the battle, not the war. The internet is a global space, think about that. What difference does one regulator make, when the internet is so loosely governed, if at all.

      The only websites required to pre-qualify people are hedge funds and pornography

      - Philip Goldstein

      In my opinion, hedge funds have been advertising to the general public for decades. As a guest anchor on Bloomberg and CNBC, as a panelist in a conference, as a speaker in a university endowment fund function, and now even on your iPod! (link) Hedge fund databases have also arbitraged on the legal restrictions to slap fees on hedge fund managers, their investors and practically any other individual who is willing and able to pay the price, for access to these (marketing) data.

      No amount of regulation will restrict our ability to innovate and evolve.

      read more

      Related Posts

      Share This

      Fund of Funds – The bridge that never was

      May 6, 2008 by

      Funds of Funds are typically seen by investors as experts in picking the right (alternative) investment target s- hedge funds – in all market cycles (so are hedge funds, but that’s a different story altogether). They are seen as bridges to higher return on lower volatility and originators of upcoming hedge fund stars.  For doing so, Funds of Funds charge a layer of fees that on the average are lower than the average 2%/20% fees charged by single hedge funds, and from years ago to possibly years ahead, investors will probably continue to invest with these Fund of Funds and continue to pay an additional layer of fees.

      (photo: This is San Francisco by Sutanto / © All rights reserved)

      Market players estimate that Funds of Funds manage about half of the assets invested in the alternative investments industry. According to Lipper, retail funds of funds that pick from the whole hedge funds market returned an average of over 10% over one year to October 31 2007. Hedge Fund Research (HFR) estimated the average performance of hedge funds to be a little more than 10% for the same year. An investor worth his weight never leaves out the risk (or volatility) when considering an investment, but since both Lipper and HFR chose to leave the average volatility these hedge funds and Funds of hedge Funds went through for the year, I will assume that they are similar – for the sake of completing this post. Taking these numbers with a pinch of salt, I find it difficult to justify paying additional fees to the Fund of Funds manager if performance was the primary pitch for Fund of Funds.

      Investors in Funds of Funds also hope that their managers are at the root of the grapevine, listening in on every conversation and idea in the industry to try and spot the next performing fund. As originators, Funds of Funds managers spend most of their time at conferences, seminars, networking events and meetings in order to keep abreast of the latest trends in the hedge fund market. With the explosive growth of the internet, cost-conscious Funds of Funds are beginning to replace such on-the-ground research with subscriptions to hedge fund databases (HFR, HF.net, etc) and news sources (Opalesque, EurekaHedge, etc). Instead of attending meetings in person, Funds of Funds are also beginning to save operations costs by making Skype calls. The maximum trading frequency of a Fund of Funds? Once a month.

      Dow Jones recently reported (link) that the proportion of U.S. pension assets overseen by Funds of Funds fell to 49% on September 30 from 57% in 2002. It states that the shift away from investing through Funds of Funds reflects an increasing confidence among institutional investors in choosing their own hedge fund investments. Could this be the real reason? Were institutional investors never confident in choosing their own hedge fund investments before this data was published? Probably, but possibly not. It seems to me that the re-emergence of the Internet as a tool for data sharing and collaboration is starting to empower investors more than before. Funds of Funds used to be a bridge to industry information, now that bridge is starting to be substituted by another – Internet 2.0.

      Evolution is never selective. Hence, as this alternative investment industry grows into what we can only imagine today, Funds of Funds must also evolve and change.

      I  would love to hear some comments on these thoughts of mine.

      Felix.

      read more

      Related Posts

      Share This