SkyBridge eyeing China's hedge fund potential

SkyBridge Capital is eyeing the potential of China's burgeoning hedge fund industry, with tentative plans to open a Hong Kong office which would serve as a gateway to the sector.  

The US-based fund of hedge funds firm plans to open a Singapore office by the first quarter of 2013, with the launch of a $250-$500 million Asia-focused fund by the end of next year, according to SkyBridge founder and managing partner Anthony Scaramucci.

A Hong Kong office may follow in 2014, he adds during a visit to the city last week. “Hong Kong is a great gateway into Greater China and to the economy in China,” he says. “The Chinese government has signalled that they want to welcome hedge fund investors into their market so we certainly want to be a participant in that.”

Scaramucci believes the government’s industry blessing is a key step towards its success. “It’s a huge sign of confidence,” he says. “While there’ll be a short-term struggle, say five years out, I think there’ll be a very mature, very healthy hedge fund industry in China."

With the economic advancement of China, and Southeast Asia, the region “has the opportunity to be the fastest-growing area of a slow-growing world”, says Scaramucci.

“If you’re a capital allocator and you want to get a healthy return for your clients, then you’re going to have to put capital in this area of the world.”

In terms of Asian clients, however, the region currently accounts for a small proportion of the firm’s global investor base. SkyBridge plans to grow its Asian clientele by establishing a presence in Asia and partnering local banks.

“Ideally I’d like to create some joint-venture relationships with some of the Asian private banks, whether in Singapore or other parts of Asia,” says Scaramucci. In Asia “we do not have the formal distribution [channels] that we have in North America and in Europe”.

SkyBridge manages about $6.4 billion and has 55 staff across offices in New York and Zurich. The firm’s expansion into Asia will be marked by its inaugural SkyBridge Alternatives (Salt) Singapore conference, scheduled for October.  

Modelled after the firm’s annual Salt event in Las Vegas, which drew 2,200 people in May, it is expected to be one of the biggest hedge fund conferences in Asia, with 400 to 600 people anticipated.  “If we have 500 people at the event, I’ll call it a really good success,” Scaramucci says.

The speaker list ranges from former British prime minister Tony Blair to economist Nouriel Roubini and former ‘Junk Bond King’ Michael Milken. The idea is to appeal to a delegate list that will be weighted towards the investor community.

SkyBridge is no stranger to Asia-Pacific, having established a partnership with Australian investment manager Challenger in early 2008. The two firms had planned a global hedge fund seeding platform, but it was shelved after the Wall Street crash in late 2008 severely impacted the hedge fund sector.

“The seeding business that we set up was victimised by the global financial crisis, so we’ve withdrawn the capital from that seeding business and we returned that capital to investors, including Challenger,” says Scaramucci.

The Australian group retains an 8% stake in SkyBridge and is still an investor in its FoHF products. “They’ve been a great business partner for us,” says Scaramucci. “They’ve helped us make inroads with some of the superannuation funds in Australia.”

While SkyBridge is seeking more ways to draw on its partnership with Challenger, the re-launch of a seeding platform is not on the cards at the moment. “[With] the competitive dynamics being what they are, I’m not going to rush to push out seeding products,” he notes.