OP Investment Management recently invested in an equity stake in the company FundSeeder. HFC’s Stefan Nilsson decided to check in with OPIM’s CEO Alvin Fan to find out what this is all about.
You keep evolving OPIM’s fund business. You recently bought a stake in FundSeeder. Tell us about it. Why did you decide to partner with FundSeeder?
Our mission has always been to seek out undiscovered talent is Asia, and then help them gain exposure in the institutional space. Having interviewed hundreds of managers last year alone, we’re acutely aware that talent can come from anywhere – financial and non-financial backgrounds. However, the system is inherently biased against those without pedigree, capital, or an audited track record – all of which are expensive privileges. And this is where the gap begins. We came across FundSeeder having spotted Jack Schwager’s startup in social media. His books have been immensely influential to traders and managers including myself. Out of curiosity, we met with the team in 2016 during a promotion trip they were running in Shanghai. It was pretty obvious that we shared the same vision and their technology could bridge the gap between emerging managers and investors.
What can FundSeeder do for newer managers in Asia?
As I mentioned, investors gravitate toward track record and pedigree, but the hedge fund industry in Asia is still young. You can count on one hand the number of managers with more than $50 billion AUM. So by definition, most of managers and traders are filtered out by a Western-biased filter. FundSeeder ignores this and re-focuses the priority on analytics, performance. A verified track record makes allocation a meritocracy again – the way it should be. Just look at the advent of Chinese fund managers – there are thousands of AMAC registered private funds onshore, many with strong risk management skills, but without an expensive due diligence process, it’s very hard to assess their credibility as offshore managers. These new managers who link up to FundSeeder will gain otherwise impossible exposure to institutional investors.
As you mentioned, Jack Schwager, the man behind the “Market Wizards” books, is one of the co-founders of FundSeeder. How important is it for a new firm like FundSeeder to have a well-known name such as Schwager onboard when it comes to creating awareness?
It’s important, not just because of the name, but because of his ethos, intensity and purpose. This is a man whose dedicated his life’s work to demystifying the psychology of greater money managers. It takes the same commitment to build a successful company and attract the right talent. It permeates into the product and the message. This is true not just of Jack, but of his partners, Emanuel and James as well.
What does OPIM bring to the table in this deal?
Access to Hong Kong and China. Hong Kong is the pearl of asset management with the largest regional AUM in the hedge space. China’s asset management industry is at an early inflection of a renaissance period. OPIM’s strong brand in the region draws more talent to the partnership.
Have you localised or amended anything in the FundSeeder product/service for the Asian markets or is it exactly the same as it in the US?
In the initial stage, OP Fundseeder will be localised including Chinese interfaces, but once we have more regional talent appear in the database, we’ll be able to rank traders and licensed managers based on their local peers. We’ll also have new analytics and functions for investors interested in talent in this space.
What is the biggest challenge in introducing this new concept in Asia?
Language will still be a major hurdle. Getting lost in translation is an underestimated barrier to allocation. The managers’ ability to articulate their edge is just as, if not more, important than the strategy itself. This is especially true with distributors who need to communicate the same to their investors. Even with good performance and high ranking, this is just a starting point. It doesn’t guarantee allocation. We still need to conduct extensive due diligence on traders and managers. To manage money in Hong Kong or China you still need to be licensed, and this means running a business that answers stringent DDQ scrutiny.
What are your long-term plans for FundSeeder in Asia?
It still early days, but the natural evolution is to build out stronger analytics to help traders improve discipline and build a feedback system to help them grow. This also means providing analytics to help investors make better decisions about their existing portfolios.
What will be your next acquisition?
If I told you, I would have to kill you.