Ex-Goldman Trader’s Hedge Fund Gets Backers as Startups Struggle

  • Vivian Lau gets backing from HS Group, sovereign wealth fund
  • New hedge fund launches at 16-year low, Eurekahedge data shows

Vivian Lau, who once co-headed a multi-billion dollar internal hedge fund at Goldman Sachs Group Inc., has attracted backing for her own firm even as many fledgling managers struggle to raise money.

HS Group, which counts David Bonderman’s TPG Capital as a partner, and an unidentified sovereign wealth fund have pledged to invest in the hedge fund managed by Lau’s One Tusk Investment Partners, said Michael Garrow, the Hong Kong-based chief investment officer at HS. The commitment is for at least three years, he said, while declining to disclose the amount.

Lau, 38, is drawing backers as the $2.9 trillion global hedge-fund industry faces sub-par returns, investor redemptions and pressure on fees. It’s been especially difficult for startups, with the number of new hedge funds worldwide, including those started by existing firms, plunging to a 16-year low in the first nine months of this year, according to Singapore-based data provider Eurekahedge.

“When we started HS, we felt the fundraising environment in Asia for experienced, first-class investment teams was quite tough,” Garrow said in an interview. “Today, it also appears to be true outside Asia. It’s exacerbated by the scrutiny of fees to justify the premium to pay for hedge-fund talent, and also for active money management compared to passive alternatives.”

HS was founded in 2013 to help hedge funds expand to become big enough to attract money from large investors. Garrow, a former employee of Blackstone Group LP’s fund of hedge funds, co-founded HS with former Goldman Sachs managing director Johannes Kaps.

Branching Out

The One Tusk commitment is the first time HS has backed a hedge fund that has already started trading, and that invests mostly in the U.S. and Europe. Before this, HS supported four hedge-fund startups -- three Asia-focused funds based in Hong Kong and another that while based in the U.S. makes half its investments elsewhere. Including One Tusk, the managers oversee more than $2 billion, Garrow said.

New York-based One Tusk makes bullish and bearish bets on securities of companies going through so-called special situations, including mergers, liquidations and industry transformations.

Lau focuses on companies with a market value of between $1 billion to $10 billion, Garrow said. She attracted an unidentified U.S. foundation as a backer when One Tusk started trading in July, and has since generated positive returns, Garrow said, declining to give an exact figure.

Bearish Bets

Pure distressed-asset funds tend to make most money during the recovery stage of the economic cycle, Garrow said. Lau’s broader investment scope and past success with profitable bearish bets on overpriced securities may allow her to generate more stable returns throughout the economic cycle, he said.

“You’ve got an interesting point in time where credit markets are very stretched in terms of rich valuations,” he said, citing investment-grade debt as an example. “There’s good opportunity for distressed opportunities in the coming months and years as interest rates rise.”

Lau, a Harvard University-educated New York City native, started her financial-industry career doing a summer internship on the Goldman Sachs team investing in distressed bank loans in 1999, working with Alan Waxman, who is now chief investment officer of TPG’s $19 billion global credit and special situations platform unit, known as TSSP.

Career History

She started full-time at Goldman in 2000, making managing director at 28 in 2006, according to Garrow. Much of her eight-year career at the New York-based bank was spent within what became known as the special situations group, or SSG, which invested its own money in companies ranging from Japan’s largest golf-course operator to pizza-chain Sbarro Inc.

Lau rose to co-head the multi-billion dollar SSG internal hedge-fund unit called "multi-strategy investing" between 2006 and 2008. She was credited for making money from the liquidations of Enron Corp., Lehman Brothers Holdings Inc. and savings bank Washington Mutual Inc., Garrow said.

She joined former Goldman Sachs SSG mentor Jody LaNasa’s New York-based hedge fund Serengeti Asset Management in November 2008, eventually becoming co-chief investment officer. It oversaw about $1.6 billion in April 2015, shortly after her departure.

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