Alp Ercil, a former regional head of New York-based hedge fund Perry Capital LLC, won $1.1 billion of investor commitments for his second Asia distressed-assets fund, according to two people with knowledge of the matter.
ARCM Master Fund II will focus on three- to five-year investments in credit and equity securities, said the people who asked not to be identified because the information is private. The amount of capital committed made it the largest hedge fund started in Asia this year, according to data from Singapore-based Eurekahedge Pte.
Global banks have scaled back lending and distressed investments in Asia after the global financial and European debt crises led to tighter regulatory scrutiny of their investments since 2008. Asian managers like ARCM and PAG, another Hong Kong-based company, have started distressed assets and loan funds to fill the void.
“The fund must have had good performance,” said Alex Mearns, chief executive officer of Eurekahedge. “Once you have an institutional setup and existing institutional investors, it becomes much easier to raise increasingly larger amounts of capital.”
Ercil’s Hong Kong-based company, Asia Research & Capital Management Ltd., also known by its acronym ARCM, sought money for the second fund after it had fully invested capital in the $935 million maiden vehicle started in 2012, the people said. Bill Wong, ARCM’s head of operations, declined to comment on the fundraising.
The Eurekahedge Distressed Debt Hedge Fund Index returned 19 percent this year through November, the top-performing hedge fund strategy tracked by the data provider. It generated the best returns among hedge-fund strategies globally in 2010 and 2012, according to Eurekahedge.
The majority of the first ARCM fund’s investments have been in distressed credit in the region, including Japan and Australia, said the people, who declined to give information on its return. The second fund received the capital from the same investors, they said.
Small- and medium-sized companies in Asia may face difficulty refinancing their debt in the public markets at the low costs of the last few years when interest rates start to climb and growth of corporate revenue fails to keep up, Michel Lowy, co-founder of Hong Kong-based SC Lowy Financial (HK) Ltd., which sells distressed and stressed credit to hedge funds, said in July.
Asian banks have been reluctant to lend to smaller companies as European lenders pull back from the region, creating opportunities for some hedge funds, he added.
The dearth of Asian distressed debt hedge funds means ARCM is “well positioned to take advantage of investor appetite for this strategy,” Mearns added.
In addition to the amount raised from investors, ARCM partners will invest a similar amount in the second fund as they did in the first, the people said without elaborating. The new fund has a life span of as long as five years, compared with three years with a possible one-year extension allowed for the first fund, they added.