Blackstone Group LP has committed $200 million to Arkkan Capital Management Ltd., run by a former head of Goldman Sachs Group Inc.’s Global Special Situations Group, said a person with knowledge of the matter.
Blackstone invested $150 million in Jason Brown’s Hong Kong-based special situations hedge-fund firm on Sept. 1, the person said, asking not to be identified because the arrangement is private. Arkkan has the right to call the remaining $50 million of capital committed by Blackstone before the end of June 2015, the person added.
Arkkan marks the second hedge-fund startup Blackstone has backed in Asia since the 2008 global financial crisis. The blessing of the world’s largest manager of alternative investments to stocks and bonds also allowed Hong Kong-based Senrigan Capital Group Ltd. to expand assets to more than $1 billion in less than two years.
“Public backing by Blackstone is the strongest endorsement a startup hedge fund can receive today,” said Daniel Celeghin, Asia head of Casey Quirk & Associates LLC, a Darien, Connecticut-based adviser to asset managers. “Blackstone-backed managers have been able to substantially accelerate their asset growth without having to wait for three-year or five-year performance numbers.”
Peter Rose, a New York-based Blackstone spokesman, and Adam Robinson, Arkkan’s Hong Kong-based chief operating officer, declined to comment.
Arkkan started investing on Aug. 1 with nine full-time employees and about $20 million of capital, the person said. Blackstone’s investment will be locked up for three years and it will get a cut of Arkkan’s revenue in exchange for its seeding investment, according to the person.
New hedge funds in Asia raised on average $20 million each in the first half, according to Singapore-based data provider Eurekahedge Pte. 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 Eurekahedge.
Blackstone in 2009 committed $150 million of seed money to Senrigan, a Hong Kong-based event-driven hedge fund manager headed by Nick Taylor, a former Citadel LLC executive.
Arkkan focuses on special situations investments in emerging markets, primarily Asia, including direct lending to companies, mispriced high-yield bonds and loans, distressed corporate credit and equities trading at discounts to their embedded value because of solvency concerns, the person said.
“Special situations continues to attract considerable investor attention, as these strategies are generally far less correlated to other investments,” Celeghin said. “However there’s greater scrutiny today on the sources of return and the ability of managers to continually find unique and sizable situations.”
Brown started his career as a credit analyst at Bear Stearns Cos in 1994 before spending 14 years at Goldman Sachs. He was co-head and sole head of Goldman Sachs’s Asian Special Situations Group between 2006 and 2011, said the person. He led the Global Special Situations Group, with more than $12 billion of investments, from 2011 to his retirement from the New York-based bank last year, the person said.
Goldman Sachs’s special situations group invests in the debt and equity of troubled companies and makes loans to high-risk borrowers using the bank’s own capital. Its investments have included those in Japan’s largest golf course operator Accordia Golf Co. and pizza-chain Sbarro Inc.
Also known as SSG, it is part of the bank’s investing and lending operations, which generated $4.3 billion of pretax earnings last year, the most of its four business segments.