Hong Kong-based alternative investor Sun Hung Kai & Co (SHK & Co) has made a commitment to the European quant investment fund ActusRayPartners Limited. The move is aimed at ramping up SHK & Co’s fund management capabilities and expanding external partnerships.
ActusRayPartners, founded in 2019 by former executives of the Australian investment bank Macquarie Group, uses an investment process it calls “discretionary probabilistic investing”. Here, the investment process is “ultimately discretionary but with probability-based implementation, underpinned by quantitative systems and analytical tools”.
The fund is expected to be ready for investments around March 2021.
The investment in ActusRayPartners follows commitments that SHK made in January 2021, including $150 million to East Point Asset Management, a newly-established alternative investment spin-out from SHK.
It also committed $15 million to E15 VC, a Hong Kong-based VC that invests in technology and healthcare. The commitment helped E15 VC close its second fund at $32 million.
“We’re seeing a lot of strong talent — either teams more recently established and spun out and/or [those] within existing firms,” Lindsey Wright, CEO of SHK’s funds management, told DealStreetAsia in an interview.
SHK is looking for “alpha generators” that could bring high-conviction and high-growth opportunities, said Wright, who previously served as the head of Asia and global chief operating officer at investment firm Matthews Asia.
She joined SHK in July 2020 to pivot the firm to a fund management business.
“We’ve got patient capital, which is different to other seeders in the market who usually need to recycle capital after the lockup period,” said Wright. “In the case of SHK, given our financing structure, it’s not necessary for us to do that… Particularly from our capital’s point of view, if fund managers are doing a great job and [fund] performance is as expected, there is no need to recycle.”
With about HK$14 billion ($1.8 billion) of internal capital, SHK’s fund management team plans to collaborate across the alternative spectrum, including with hedge funds and those in private equity, venture, credit, as well as crypto — an area it is focusing on lately.
“I think the evaluation process can be more challenging because, during COVID, you don’t have the ability to meet face-to-face,” said Wright. “It’s extremely important that, throughout this COVID period, there is extra rigour on ODD (operational due diligence), and making sure that [fund] managers have really thought things through.”
Focusing on the global market with an Asia Pacific bias, Wright said that she looks to partner with external fund managers in four ways. Firstly, SHK’s fund management team plans to invest in established funds that are gathering capital for their existing vehicles.
Secondly, SHK plans to invest in smaller funds searching for acceleration capital.
Wright and her team have also adopted what she calls “an incubation model”. The plan is to bring fund managers who are still building out teams and working through particulars around their investment strategies in-house to help them grow until the managers are ready for a spin-out.
The team also accommodates a fourth way of cooperation — forging partnership deals with newly-emerging fund managers who have recently departed from large-scale companies, which is very much the case with ActusRayPartners and East Point.
Planned launch of funds
While the firm seeks to largely make more bets on external fund managers, SHK is also planning to introduce a few in-house investment vehicles, including a real estate loan strategy and a fund of hedge funds, Wright disclosed.
The real estate loan strategy, dubbed Multiple Capital Investment Partners, will be an APAC-focused, five-year, closed-end vehicle under the management of SHK’s in-house investment professionals in Australia and Singapore.
The vehicle, which could hit the market after the Lunar New Year holiday (February 16), will be funded with a seed commitment of $100 million from SHK. It will have a target corpus of $200-250 million.
Meanwhile, SHK is working through details around the establishment of a fund of hedge funds, which might make its debut after the first quarter of 2021. SHK may create this Asia-focused fund of hedge funds by integrating a range of hedge funds that it has invested in over the past five years. The pool of hedge funds is estimated to be worth a combined $200 million.
Discussions around the fund of hedge funds are ongoing and subject to change.
Established in 1969, SHK is a major shareholder in the Hong Kong-based s consumer finance firm United Asia Finance Limited. The firm registered about HK$43 billion ($5.5 billion) in total assets as of June 30, 2020.