Gerald Kok, a former fund manager at Macquarie Group Ltd., plans to start a hedge fund that invests in Asian and U.S. companies going through corporate events such as mergers and divestments.
GSK Global Fund will focus on companies that have share prices at a significant discount to their fair value, said Kok, who runs the Singapore-based fund-management company G&S Asset Management Pte with business partner Susan Xiao. Xiao also plans to start a different fund later in the year, Kok said. Both funds will have a combined $10 million of assets under management, he said, declining to elaborate.
Kok plans to start the new fund as low interest rates globally help bolster stock markets. The MSCI World Index has gained 42 percent over the past two years, outperforming the 15 percent gain by the MSCI Emerging Markets Index. Asian hedge-fund startups have raised an average $20 million each in the first half of 2014, more than the average $15 million raised in 2013, according to Singapore-based data provider Eurekahedge Pte.
“We will be flexible and go where the compelling investment opportunities are,” Kok, 37, said in an interview in Singapore on July 11. “While we prefer to have catalysts in our investments, it is not absolutely necessary as long as it’s cheap enough.”
The fund will look for special-situation stocks that are priced below their fair value and where a catalyst, such as the sale of underperforming assets or a management change, could drive the company’s share price higher, Kok said.
There might be “even more subtle situations, such as changing management incentive metrics to be more aligned to shareholders’ interests” that might boost a company’s share price, he said.
GSK Global Fund will also invest in stock-related securities such as convertibles and options, he said. A large part of the portfolio will probably be in developed Asia-Pacific countries such as Singapore, Hong Kong, Taiwan and Australia, and the U.S., with mostly long positions, he said.
The initial capital of $10 million will be provided by the Kok and Xiao families, other high-net-worth individuals and industry contacts, Kok said, adding that they will eventually expand to include institutional investors.
Special-situations investment opportunities can be found more in the U.S., compared with Asia, because many Asian companies are either controlled by the state or by founding families, making them less open to shareholder activism, Kok said. Asian companies also rely on mergers to create value less than their U.S. counterparts as the growth rates in Asia are higher, he said.
Kok was previously a vice president at Macquarie in Singapore, where he focused on special-situation strategies in Asia, he said. He also worked at Credit Suisse Group AG’s investment-banking division as well as hedge-fund firm Gruss Capital Management Ltd. in Hong Kong, he said.
Prior to setting up GSK, Xiao was a fund manager with her family’s investment trust, Prosperstone Capital Ltd., in Singapore, Kok said. She also worked as a research director at Ellis Munro Asset Management Pte and as a research manager at Target Asset Management Pte.