| HONG KONG
HONG KONG May 3 Five former proprietary trading
desk bankers at J.P. Morgan in Singapore have started a new
firm, linking up with one of Canada's largest mutual funds to
launch the business.
Dhimant Shah, 41, the former head of proprietary trading at
J.P. Morgan Chase & Co in Singapore, told Reuters that
the plan is to launch two funds investing in credit markets. The
funds will also bet on foreign exchange, equity indices and
U.S. regulators have effectively ended the traditional
practice of banks trading their own money through prop desks,
prompting hordes of traders to strike out on their own.
What makes the J.P. Morgan Singapore spin-out unique is the
support it is getting from Canada's Mackenzie Investments, the
$64 billion money manager.
Traditional Western asset managers such as Aberdeen Asset
Management plc and BlackRock Inc, in their
efforts to expand in Asia, have followed the standard path of
launching mutual funds and other products familiar to them.
Mackenzie, by contrast, is hooking up with the prop team to
plant the Canadian group's flag in Asia, a strategy that comes
with heftier risks and rewards.
"We were looking for a strong and stable institutional
backing," said Shah, who is leading the spin-out, which will
remain based in Singapore and be named Mackenzie Investments
Pte. Ltd. "And Mackenzie was looking to foray into the Asia
credit space along with its strong macro capabilities so as to
potentially build an absolute returns platform."
Mackenzie's funds will not be available to retail investors.
Shah did not disclose the initial investments in the funds
but people with direct knowledge of the plan said Mackenzie's
backing includes a $100 million start-up capital for a long only
fixed income fund, and $20 million for a long/short hedge fund
that will combine credit and macro strategies.
CREDIT AND MACRO
Macro hedge funds focus on major economic trends and events
and place bets anywhere they see value, including stocks, bonds,
currencies, commodities, and derivatives markets. Such funds
collected a net $18 billion last year, according to data from
Eurekahedge, the most by any hedge fund category in the world.
Credit and macro hedge funds in Asia such as Double Haven,
Dymon Asia Macro and Fortress Asia Macro have raised hundreds of
millions of dollars from investors in the last two years.
But with interest rates at record lows and yields falling,
investors are wary of taking a directional view on credit at
these levels and are layering it with other asset classes.
"As of now, no doubt, things are very tight overall in the
credit markets," said Shah.
"That's why we have a mix of credit and macro strategies.
This is how we will look to manage the downside more proactively
as opposed to just running it as a pure long credit strategy."
Credit funds have benefited from a worldwide low-growth
environment. The Eurekahedge Asia fixed income index rose 12
percent in 2012, outperforming a 10 percent rise in the regional
long/short equity hedge funds and 4 percent gain in macro funds.
Shah is joined by former colleague Vasanth Arunagiri, who
invested in the credit market at JPMorgan in Singapore, and
Rahul Sinha, an Asian macro trader at the Wall Street bank.
Carmine Di Conno and Alex Tesei, who traded global macro at the
bank, are other team members.