FCA eyes third Asia focused hedge fund seeding

HONG KONG (Reuters) - London-based FRM Capital Advisors (FCA) expects to seed three to four hedge funds in 2011, one of which could be in Asia, Chief Operating Officer Patric de Gentile-Williams said.

FCA is open to seed managers moving out of proprietary trading desks as Wall Street banks shuts them in light of the "Volcker rule", which limits the risks banks can take with their own capital in the wake of the global financial crisis.

"Expect us to do 3-4 investments this year, and there's a probability one of them will be in Asia," de Gentile-Williams told Reuters in an interview.

"We are looking to seed high quality managers and we would be very happy if those happened to be based in Asia and we would be very happy if they came out of prop desk."

The hedge fund seeding specialist invests about $50 million (31 million pounds) in one fund and has nearly $300 million across six hedge funds globally, two of them are in Asia.

FCA is a an unit of Financial Risk Management, a fund of hedge funds group, that manages about $9 billion.

In late 2009, FCA invested in Asia-focused Isometric Capital, a Hong Kong-based hedge fund managed by Sanjiv Bhatia, the former head of Deephaven Capital Management's Asia office.

Last October, it added its second Asia focused manager by investing about $50 million in San Francisco-based Sensato Capital, founded by Ernest Chow and Jonathan Howe, former co-heads of active equity strategies at Barclays Global Investors.

The ideal fit for FCA, de Gentile-Williams said, would be managers with established investment teams, a very clear strategy and investment thesis, structured process, unique selling point and a very clear risk management process.

"That's already a very hard thing to find. We see lots of people who have parts of that."

The $152 billion Asian hedge funds industry is dominated by funds managing less than $50 million in terms of numbers but a growing number of launches in 2009 and last year have seen large inflows as interest in the region returns.

"We are open to high quality managers leaving some of the established shops to open on their own," de Gentile-Williams said. "There could be quite a few high powered launches in Asia this year, probably more than last year."

The executive declined to name the potential investments.

Asia is likely to see hedge fund launches such as the ones planned by Charlie Chan, former Credit Suisse (CSGN.VX) proprietary trader, and Benjamin Fuchs, who previously worked as a proprietary trader for Lehman Brothers in Tokyo.

Carl Huttenlocher, who quit Highbridge Capital as head of Asia investments to set up his own start-up in the region, and Azentus Capital, started by former Goldman Sachs (GS.N) trader Morgan Sze are other high-profile funds expected.

FCA is also ready to seed small-sized managers.

"We can be 90 percent of the fund. We are not bothered about that. What we are bothered about is that the markets they invest in and the strategy that they run could absorb at least $500 million to a $1 billion," de Gentile-Williams said.

(Reporting by Nishant Kumar; Editing by Chris Lewis and Ken Wills)