Roshan Padamadan, a former product specialist at HSBC Holdings Plc, is starting a hedge fund that will invest in liquid securities including stocks, bonds and derivatives globally.
Luminance Global Fund will invest in companies “where the business models survive in almost every scenario,” said Padamadan, who will run the fund. It will start trading on Jan. 2 with initial capital of about $2 million that Padamadan said he expects to rise to $4 million in about three months.
“In this day and age, macroeconomic developments are particularly hard to call,” Padamadan, 35, said in an interview in Singapore. “We don’t want companies which will swing with macro events. We are looking for companies which will be fine irrespective of macro.”
Padamadan is starting the fund with Swiss-Asia Financial Services Pte, which will provide non-investment services to help it cut startup costs and attract investors. Hedge-fund startups are turning to platforms like Swiss-Asia after funds-of-funds, which allocate money to various managers, lost assets following the global financial crisis in 2008, hampering smaller hedge funds’ ability to raise capital.
The $2 trillion global industry is facing pressure to cut fees to attract investors amid rising costs of complying with regulations and client demand.
Luminance Global Fund will charge a 25 percent performance fee, with the first payment due after three years, said Padamadan and product specialist Sunand Razu, 35. They will not charge a management fee, they said.
Padamadan previously worked for HSBC for seven years, including in India, London and Singapore, across corporate credit analysis, sell-side research and asset management, he said. In Singapore, he worked as a product specialist in the team of Sanjiv Duggal, the manager of the Luxembourg-based HSBC GIF Indian Equity Fund.
Luminance Global seeks absolute returns by picking securities it regards as over- or undervalued and uses derivatives to cushion the risk of its investments, Padamadan said. The fund uses futures and options to calibrate risk, he said.
The Eurekahedge Hedge Fund Index returned 7 percent this year through November, heading for a second straight year of annual returns.
The average Asian hedge-fund startup raised about $9 million this year, down from $25 million seven years ago before the 2008 global financial crisis dented investor interest, according to Singapore-based data provider Eurekahedge Pte.
“If you have to set up your own company it is very costly,” said Swiss-Asia Chief Operating Officer Steve Knabl. “Eighty percent of the time you are managing your business and not managing your fund. Small managers can’t afford to have a chief operating officer and compliance officer et cetera for a functioning investment.”
Swiss-Asia, based in Singapore, has $1.5 billion in assets under management and employs 25 investment professionals, according to an e-mailed presentation.