Asian consortium launches distressed debt fund

The Asian Debt Fund (ADF), a recently launched distressed debt fund covering the Asia ex-Japan region, will soon begin marketing. The Singapore-based fund is sponsored by three key investors, including Finansa, a Bangkok-based investment bank; Japan Asia Investment Corporation (JAIC), a Tokyo-based venture capital company; and Japan's Bank Aozora.

The fund, which launched with $22.5 million, now has $25 million under management.

"We've spent the past six months investing our existing capital into low risk situations that provide attractive returns," says Moe Ibrahim, fund manager at ADF. "We're now close to fully invested and since performance is in line with expectations, we've begun actively marketing the fund."

The fund recently accepted its first outside investment from a fund of hedge funds based in Hong Kong.

Ibrahim expects to grow the fund to about $100 million to $150 million over the next 12-18 months, an amount he feels can be deployed with relative ease in any economic climate.

The fund has delivered a cumulative net return of over 5.8% year-to-date. During the turbulent market environment of April and May, the fund returned 3.3% and 1.3% respectively compared to other hedge funds producing flat or negative returns. Ibrahim says the fund targets a return of 1%-2% a month.

Ibrahim previously worked with Lazard's distressed debt group, and was a senior member of the Lazard Debt Recovery Fund, a global distressed debt fund. He started his career in New York and moved to Singapore in 1999 to run Lazard's Asian distressed debt business.

Ibrahim explains the fund benefits from being able to access the institutional resources of its three key backers.

"We're operating within an institutional setting, and this gives comfort to investors. Thanks to the vast collective relationships of the fund's sponsors, as well as the investment team, the fund is often able to negotiate transactions on a non-competitive basis," he says.

Highlighting the importance of on the ground knowledge in Asia, Ibrahim points out that, "The fund's sponsors have offices in seven locations in Asia. Their local staff often have longstanding relationships with the fund's target companies and help us to access invaluable information."

The ADF is also able to use the resources of its sponsors to keep costs low. "Most of our legal work is performed by in-house legal counsel, which is provided as a free service from one of our sponsors," he comments.

An investment committee, comprising of Ibrahim, and senior representatives from each of the three sponsors, approves all investments made by the fund.