November 9, 2012 / 4:20 AM / 5 years ago

Woori readies $200 mln seed capital as Asia hedge funds seek backers

3 Min Read

* Injects $50 mln with French partner NewAlpha

* To seed two hedge funds in first quarter next year

* Seeders smell opportunity in tough capital raising climate

By Nishant Kumar

HONG KONG, Nov 9 (Reuters) - Singapore-based Woori Absolute Partners is raising a $200 million seeding fund with French joint venture partner NewAlpha to invest in capital-starved Asian hedge funds looking for backers.

A seeding fund injects early stage capital into a hedge fund in exchange for a cut in the fund's revenues. Such businesses flourish in a grim capital raising environment, like the one currently prevailing in Asia.

While hedge fund managers are reluctant to share profits, rising competition from a number of spin-outs from banks as they shut proprietary trading desks are spurring the hunt for seeders.

"This is very much a supply and demand imbalance," Edward Moon, co-founder of Woori Absolute Partners, said.

"We see a lot of great supply but the demand in terms of capital chasing that supply has really dwindled and we think that is a great opportunity," said Moon.

Woori and NewAlpha launched the fund on Nov. 1 and are raising capital from Asian and European investors. They have injected $50 million into the fund initially and have spent the last 18 months screening more than 150 Asian hedge funds.

Two of them could get roughly $25 million each in the first quarter of next year, Antoine Rolland, chief executive of NewAlpha said, adding they plan to seed several others during 2013 as they raise more capital.

Woori, part of South Korea's Woori Investment & Securities , joins the likes of Hong Kong-based Samena Capital in seeding Asian hedge funds.

Seeders typically lock-up capital for two to three years.

They take 20-30 cents of every dollar earned by hedge funds in addition to their share of the return generated, a price many smaller managers in Asia are willing to pay in exchange for long-term capital and other help such as marketing and business buildout.

Woori's move comes as some other seeding investors have wound back their investments. European seeder FRM Capital Advisors this year pulled out of Hong Kong-based Isometric Investment, while Singapore-based Orvent Asset Management shut down its hedge fund after Swedish seeder Brummer & Partners took its money back.

Samena Capital, however, is currently raising $300 million for its second seeding fund, half of which it expects to get next year, to add to its first $100 million fund.

Samena, which provides $25-50 million in seed capital, will invest in least two new hedge funds in the first half of 2013, said managing director Julius Wang.

"It's quite an easy conversation to have right now," said Wang. "It's the best environment for a seeder and for our investors too who can get a double bang for their buck." (Reporting by Nishant Kumar; Editing by Richard Pullin)

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