Global Asset Management

Hedge Fund True Partner Wins $33 Million From Dutch Seeder IMQ

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True Partner Fund wins seeding by IMQ Investment Management BV - by Ralph van Put

Article of Bloomberg reporter Bei Hu with CEO Ralph van Put and CIO Govert Heijboer

True Partner Fund, a Hong Kong- based volatility trader, won $33 million from IMQ Investment Management BV, a Dutch pension-backed provider of capital to emerging hedge funds, as it seeks more institutional money.

The investment took True Partner's assets to $107 million, Ralph van Put, True Partner Holding Ltd.'s Chief Executive Officer, said in a telephone interview. The majority of the global volatility arbitrage fund's investments are in options on Asian stocks and stock indexes, he said.

Demand for volatility funds is rising as investors seek funds that can protect them against a rebound in price swings and add returns uncorrelated to traditional assets. Central banks are scaling back the monetary easing that has calmed markets after the 2008 global financial crisis, boosting opportunities for such funds to profit from market moves.
"People expect volatility and they want some diversification in their portfolio," said van Put. "They think the inefficiency in Asia combined with volatility would give them a good exposure here."

True Partner, which started the year overseeing $33 million, has more than tripled assets this year. It also received $30 million from another Dutch institution in recent months, van Put said, declining to identify the investor because of a confidentiality agreement.

Acceleration Capital

IMQ in 2009 received 250 million euros ($334 million) of investment from APG, the asset manager for Dutch pensions firm Stichting Pensioenfonds ABP, according to the former's website.

Providers of acceleration capital such as IMQ help smaller hedge funds to expand their assets to a level where they can attract more money from institutions. They receive a share of the hedge funds' revenue in return for the investments.
"Many institutional clients don't look at you if you are smaller than $100 million and you have a track record of less than two years," van Put said.

The True Partner Fund returned 19 percent this year through August, taking the annualized gain since its July 2011 inception to 15 percent. The Eurekahedge Hedge Fund Index gained 3.3 percent this year, according to preliminary data.

A group of former traders of Dutch option market maker Saen Options BV set up the relative-value fund, which uses computer models to spot which derivatives based on equity and equity indexes overprice or underprice volatility. It conducts a few hundred trades a day, van Put said.

Volatility Bursts

True Partner began trading with $22 million from its partners and seed capital from Samena Asia Managers. Seeders provide startup capital to new hedge funds in exchange for an equity stake or a share of their revenue.

Unprecedented central bank intervention has pushed the Chicago Board Options Exchange Volatility Index - which tracks the cost of options to protect against declines in the Standard & Poor's 500 Index and is known as VIX - 30 percent below its 10-year average and 80 percent off its November 2008 peak.

True Partner often exploits pricing differences across regions, according to Chief Investment Officer Govert Heijboer.
"Korea, Taiwan and Hong Kong markets currently are torn between following the bullish sentiment of the U.S. and the mixed signals coming from China, which creates additional bursts of volatility from time to time," Heijboer said in an e-mail.

The VIX index quadrupled its 10-year average at the height of the global financial crisis in 2008.
"In Asia, you still have different markets, different currencies, different investor behavior," said van Put. "So there's much more inefficiency in Asia than in the U.S."


Used with permission of Bloomberg L.P.
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