Kenneth Lee and Michael Yoshino, former Soros Fund Management LLC Asia specialists, plan to start their own hedge fund investing in Asian equities with the backing of Hong Kong’s HS Group Ltd. in the third quarter.
Pleiad Investment Advisors, set up by the former Soros China and Japan specialists, plans to open the pan-Asia fund with more than $150 million of commitments from its founding partners, the group and affiliates, HS Group said in an e-mailed statement. Pleiad was incorporated in Hong Kong, according to a document obtained from the city’s Companies Registry.
The deal is the maiden investment of HS Group, a company set up by Michael Garrow, formerly of Blackstone Group LP, and Johannes Kaps, previously of Goldman Sachs Group Inc., to provide long-term capital to startup and newer hedge funds in Asia. Smaller and more nascent funds are courting long-term strategic investors like HS Group to bridge the gap at a time when investors favor larger managers with more assets.
“The founding partners have first-class pedigree and track record which will help with fundraising,” said Will Tan, a Singapore-based recruiter with Principle Partners Pte, adding those are no longer a guarantee of success. “A seeder who is committed to the long-term success of the fund and can write a cheque of at least $100 million are important factors.”
Fifty-seven percent of the 167 regional equity long-short hedge funds, which began trading with less than $50 million, still manage less than that amount after an average of 5.3 years in existence, according to a Citigroup Inc. report in December, which cited data from Singapore-based Eurekahedge Pte.
HS Group is supplying the majority of Pleiad’s initial capital through its Sponsor Fund, according to the statement.
Lee, 35, and Yoshino, 40, have known each other for more than 10 years, having worked together on Soros’s Asia equities team, at New York-based hedge fund Tiger Asia Management LLC and private equity firm TPG Capital, according to Kaps, Garrow and their LinkedIn profiles.
Pleiad will have a “senior” team of more than six people, including two analysts, a chief operating officer and a chief financial officer, said Garrow, HS Group’s chief investment officer, in a phone interview from the U.S.
The fund can potentially manage $1.5 billion to $2 billion, Garrow said. It will make long-term, concentrated investments in liquid companies, picking stocks using a combination of company fundamental analysis and industry research, he added.
Pleiad will maintain a “moderate” net exposure, the difference between long and short investments, said Garrow, setting it apart from the typical long-biased Asian equities fund that makes most of its money in a rising market. Shorting involves selling borrowed stocks, betting on their prices to decline.
“We think it’s an all-weather strategy,” Garrow said.
HS Group will provide capital to managers for a minimum of three years and guidance to help them build a business that can attract institutional investors, according to Kaps, a former Goldman Sachs managing director who is now HS Group’s chief executive officer. Garrow and Kaps declined to give specifics on the financial arrangements with Pleiad.
Formerly known as Headland Strategic, HS Group counts V-Nee Yeh as chairman of its advisory board. A member of the board of the Columbia University endowment, Yeh co-founded Value Partners Group Ltd. in 1993 with former journalist Cheah Cheng Hye. The Hong Kong-based company oversaw $10.5 billion at the end of February, it said in a statement to the Hong Kong stock exchange last month.
Soros Fund Management, founded by billionaire investor George Soros, returned outsiders’ money in 2011 and converted into a family office to oversee funds for Soros and his family.
Lee and Yoshino left the New York-based company earlier this year, according to licensing information posted on the website of Hong Kong’s Securities and Futures Commission. Michael Vachon, a Soros spokesman in New York, didn’t immediately reply to an e-mail seeking comment sent outside of business hours.
London-based trade journal AsiaHedge reported the fund plan earlier.