Singapore’s sovereign wealth fund GIC has committed $100 million to a hedge fund started by former employee David Mercurio.
Citing people familiar with the matter, Bloomberg reports that Mercurio, who worked for GIC, secured capital commitments from the wealth fund to become a limited partner (LP) in his hedge fund Lauro Asset Management.
The fund is a long-short equity fund. GIC will reportedly invest up to $100 million, capped at 50 per cent of the fund’s assets.
As at end-April, Singapore-based Lauro Asset Management had $35 million in capital under management. It returned 4.7 per cent in the first four months of this year, in line with the average 4.5 per cent gain for equity long-short funds, according to data provider Eurekahedge.
Mercurio is the founding partner and chief investment officer of the hedge fund, which was founded in January 2016. He served as a senior portfolio manager at GIC and worked there from October 2001 to November 2011, subsequently moving on to head Asian equities at GLG Partners in Hong Kong until March 2015.
Recent quarters have seen GIC re-calibrate its investment strategy and turn to alternative assets that include private equity (PE), hedge funds and real estate to boost returns amid expectations that low-interest rates will weigh on earnings in the coming decade.
In its 2015/2016 annual report, it noted: “Prospects for returns on assets are not as good as what we saw from the 1980s to the 2000s. We expect real returns for both the GIC Portfolio and Reference Portfolio to be lower, due to the all-time low interest rates, modest global growth prospects and high valuations of financial assets.”
“Complicating the prospects for returns is a more uncertain outlook for economic growth. High debt levels in both developed and emerging countries weigh on growth and undermine the effectiveness of macroeconomic policies. Other risks to the growth outlook include rising income inequality, populism, geopolitical tensions and the potential negative impact of disruptive technologies. Rising populism could generate more protectionist policies. Public sentiment against globalization and foreign investors could grow and affect global investors like GIC,” they added..
GIC has earlier, too, made commitments to hedge funds managed by former employees. Avanda Investment Management, which was co-founded by former group chief investment officer Ng Kok Song, and Nuvest Capital Pte, set up by Aje Saigal, a former chief investment officer of global equities, are two examples of such commitments.
GIC and Lauro Asset Management have declined to make public comments on this matter.
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