Stephen Satchell, Managing Partner, GCS Capital Management
Can you tell us a bit about GCS Capital Management?
GCS Capital Management is a Singapore-based investment advisor that was founded in 2009. The firm manages private investment funds across the credit, special situations, and illiquid investment markets of Asia, with a particular focus on private lending transactions and leveraged issuers. GCS Capital Management currently manages two funds with an excess of $US50 million of assets under management.
What is your own background?
Prior to establishing GCS Capital, I was the head of the proprietary credit trading business in Asia for Credit Suisse.
Describe your investment strategy and why it differs from what other fund managers are doing.
The investment strategy is credit and the niche is special situations and private lending. What differentiates GCS from most other credit managers is its focus on the illiquid section of the market.
Investors in almost all asset classes (credit, equity, commodities, etc.) are strongly skewed toward the liquid part of the market. This presents opportunities for those willing to enter into transactions that are not as liquid as public bonds. For borrowers who are tapping thimarket, they are paying a massive premium relative to risk. The goal is to be significantly overpaid to do illiquid transactions.
What investment themes in Asia do you see as the most attractive at the moment?
Asia will be driven by two factors: the ongoing slumps in Europe and the US combined with medium term outlook for a slowdown of growth in China (soft vs. hard landing).
How has your approach to risk management changed in recenttimes?
In our case, not that much. As an investor in illiquid transactions, as has always been the case, almost all risk management comes to bear prior to entering a transaction.
Do you see changes in regulation as a threat or an opportunity?
We just see it as a cost. Increased regulation and therefore increased costs are a given. Larger firms will obviously be able to spread these costs over a larger AUM base. As a firm that will always
look to stay relatively small, increased regulation is just a known cost for the future.
Fundraising in Asia: as Asian investors increase their hedge fund allocations, do you think Asian managers will start to benefit more or will big global fund managers get most of the assets?
As the number and quality of Asian investment managers increase, I see them taking a larger proportion of allocations from Asian investors (relative to the past). However, the large global institutions will always get the bulk as they can provide stability over returns.
Why have you chosen to operate from Singapore?
GCS Capital chose Singapore for three reasons. As our due diligence process requires on-site analysis, Singapore is great as it is centrally located to the markets where we transact the most (Australia, Indonesia, India, and China). It is a base for the originators and structurers of the deals that we enter into, so meeting with people is easy. And Singapore has an efficient business and regulatory environment for investment advisors.
What would you have done if you hadn’t been a fund manager?
If some university would take me, I would have liked to have been a university history professor.