Gopher Redwoods directly invests in small fund managers that focus on onshore Chinese and Asia-Pacific equities. The new entity is expected to develop Gopher AM’s investment management capabilities beyond private equity, which accounts for nearly 60% of total AUM, Ma told FSA.
Ma explained that there are a number of small domestic fund managers that have sound investment strategies but do not have supporting back-office platforms.
“We try to upgrade their middle- and back-office operations and risk management to help them become a global player, so they can offer their products to global investors,” he said.
Ma added that in China, a lot of these firms remain unnoticed. “In the hedge funds space, for example, there are 8,000 funds in China, but everyone is just investing in the top 10.”
Gopher Redwoods will either take a 10-20% equity stake in a firm or acquire the whole team, he added.
The firm’s strategy is similar to Hong Kong-based fund-of-hedge-fund manager Penjing Asset Management, which has been seeding hedge fund managers in the past two years. The firm, together with its investors, receive a revenue kicker in addition to the investment returns the hedge funds make.
Gopher Redwoods has already invested in five funds, which collectively manage around $2.2bn in assets, Ma said. These include a global macro manager, a quantitative market neutral fund and a China asset-backed securities manager.
“We are seeing huge opportunities in the China asset-backed security markets, especially since principal-guaranteed products cannot be launched anymore by banks [after the crackdown on shadow banking]. So clients are looking for more substitutes for those products.”
Regional fixed income
Separately, Ma said that the firm has also been developing its own Asia-Pacific fixed income capabilities.
In May last year, Gopher AM hired Lim Yee Choon as an investment director managing fixed income portfolios. Previously, he was at Value Partners, where he managed $6bn in fixed income portfolios, according to Ma.
Since Lim’s hire, the firm has added four staff to support him and has launched two fixed income products, which include a global emerging market fund.
Other developments include Gopher AM partnering with Citic Securities in Hong Kong, which should allow the firm to distribute its products outside the Noah Holdings channel, he added.