In preparation for the formal launch of its multi-strategy Asia ex-Japan fund of hedge funds, Investor Select Advisors has hired ex-Putnam CIO Paul Warren. Based in London, Warren will be the lead portfolio manager for ISA's upcoming Asian fund and will also have responsibility for researching Asian hedge funds based in Europe and the United States.
ISA has been incubating its Asia ex-Japan fund of hedge funds (ISA First Light Fund) with its own proprietary capital since July 2002. Nick Bullman, ISA's chairman, says demand for an Asian fund of hedge funds has primarily come from European investors looking to enjoy the upside potential in Asia without worrying about the volatility.
"Our Japan-only fund has been a great success with investors," he says. "They are now interested to see a similar product for Asia ex-Japan as they are attracted by the idea of hedged exposure to the region's value potential.
"The Asian hedge fund industry has now reached a level of maturity where it is feasible to run a low volatility portfolio with good returns."
Bullman expects the ISA First Light Fund to re-launch by May or June this year with about $30-$50 million. Within this time, Warren will need to add at least three new Asian managers to the fund to bring it in line with the standard 10 to 15 managers ISA has in its other fund of hedge funds.
The fund is expected to return around 10%-12% per annum over a market cycle of five years with a volatility of around 7%-8%.
Bullman says the decision to base Warren in London reflects the fact that much of the Asian-focused hedge fund talent does not reside in the region itself.
"Only 25% of the managers in our Japan focused fund are actually based in Japan," he says.
ISA's Hong Kong-based Vivian Kwok and Melbourne based Andrew Crawford will support Warren by conducting due diligence on Asian based funds.
Prior to his role at Putnam, Warren has held several positions focused on the Asian equity markets, including five years based in Hong Kong heading Japanese equity investments for Rothschild.
"Paul brings a tremendous wealth of fund management experience to ISA as well as expertise in Asia," Bullman comments. "My relationship with Paul stretches back 20 years. He has been a shareholder in ISA since its inception and his move here represents a logical progression. Despite his mutual funds background he has always been a strong believer in absolute return products."
Warren's addition to the ISA team also represents the commitment the group has made to its clients to expand resources in line with asset growth. According to Bullman, one analyst can keep track of about 12-15 hedge funds. ISA currently invests in about 80 hedge funds, which are covered by seven analysts. With Warren as the group's eighth analyst, the firm will be in a position to further widen its portfolio.