By Umesh Desai and Jeffrey Hodgson
HONG KONG (Reuters) - Distressed debt investors in Asia stand to make windfall gains as even good firms struggle in the global financial crisis, but they need to be patient, an executive with hedge fund manager ADM Capital said on Tuesday.
Readying itself for this opportunity, the distressed debt specialist is looking at raising $500-$1billion in new funds in the coming year, anticipating a pickup in defaults and cases of financing difficulties.
Hong Kong-based ADM, which manages about $2.5 billion in assets, believes the worst is still to come for the region given the faltering economy and tight credit markets, Robert Appleby, the firm's chief investment officer told the Reuters Global Finance Summit.
"I view it quite simply as the best time in my lifetime for investing in Asia and investing in distressed ... the second best time was back in '97-'98."
He said the current distressed debt opportunities are better than those a decade ago because of the nature of the underlying assets.
During the Asian financial crisis in 1997/98, the distressed debt opportunities mainly consisted of non performing assets being sold by Japanese and Korean banks.
"Today you are getting good companies' debt being sold by stressed investors. That is a very different proposition because turning around a good company is much easier than turning around a bad one."
At the same time, ADM has almost a third of its assets in cash as it thinks even better opportunities are yet to appear.
"Early is the new wrong, so if you go piling in and spending all your money you can get it very wrong," Appleby said.
HIRING, NOT FIRING
The former Credit Agricole Indosuez and Lehman Brothers executive said the firm had not yet decided exactly where to place any new money raised, but it had considered creating a sister vehicle for its flagship ADM Galleus hedge fund.
The Galleus fund, which had $860 million of assets at the end of September, was down 8.9 percent in the first nine months of the year after gaining 14.1 percent in 2007. It has generated an annualized return of 11.7 percent since its inception in April, 1999.
ADM began investing in distressed debt in 1998 following the Asian financial crisis. Its funds often buy out existing creditors to initiate financial or corporate restructuring of companies that are delinquent or at risk of bankruptcy.
Given the current environment, Appleby said there was no need to seek out exotic trades or markets for healthy returns.
"You don't have to go to weird, wonderful places ... you don't have to take exogenous risks -- its right at your doorstep," he said, referring to his funds' focus on the main markets of Hong Kong, China, India and Turkey. Continued...
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