Ignites Asia, a Financial Times Company

A team of alternative-investment veterans has launched a new platform, Milltrust International Group, to connect institutional investors globally with handpicked asset managers across Asia, Latin America and Africa.

The Singapore-based venture ? with key leaders also in London and Geneva ? is in the process of identifying a limited number of firms that will act as investment advisors to managed accounts overseen and serviced by Milltrust.

For those firms, the platform could provide the distribution reach and infrastructure necessary to attract institutional clients that might otherwise be reluctant to hire local players even in fast-growing emerging markets.

?This whole business is really predicated on the fact that Western institutions are underinvested in the developing world,? says Milltrust CEO and founder Simon Hopkins, who also founded the U.K. hedge fund advisory firm Fortune Group, now part of Close Brothers. ?The wake-up call has come post-2008.?

Milltrust will serve as a ?regulated, familiar conduit? to regional managers ? both traditional and alternative ? that fall outside the spectrum of established emerging-markets powerhouses, says Hopkins, who relocated to Singapore earlier this year.

The firm is driven by a belief that ?local investment managers will do a better job than global emerging markets managers, most of which are very big but index-based investors and have delivered very little added value,? he says.

Over the next year, Milltrust plans to bring on board several managers in both Asia and Latin America.

?And if we are lucky, and we cast our net wider, we might be able to offer opportunities in India and Africa, as well, within the next 12 months,? says Hopkins.

As the platform grows, the firm may also develop multi-manager or fund-of-funds offerings.

?We have the ability to do this,? says Hopkins, who built funds of funds at Fortune, which he sold to Close in 2006 and managed through 2010. ?We could run portfolios of single-manager investments or funds of managed accounts.?

But the firm plans to avoid the ?supermarket? approach to building manager lineups, which tends to disappoint both investors and managers, he says.

Under the platform structure, Milltrust itself will serve as the asset manager with a fiduciary responsibility to the client, and it will retain a portion of the fees it passes on to its investment advisory partners. The firm has engaged State Street as its custodian and administrator and InfraHedge as its platform services provider.

Milltrust is targeting a level of institutional scale and transparency common to established platform providers, such as Amundi and Lyxor Asset Management, and multi-managers, such as Russell Investments and Northern Trust Global Investments.

At the same time, Hopkins pledges that Milltrust?s portfolios will be no more expensive for investors than accessing the underlying managers directly through a fund structure.

?All of these services cost money,? says Hopkins. ?It would be silly to pretend otherwise? but those costs will be borne by Milltrust or be borne as part of our costs.?

That commitment requires scale. Milltrust will be seeding the platform with first-investor capital of US$100 million, says Hopkins, but the venture itself is built to accommodate billions of dollars in assets.

Hopkins is joined at Milltrust by Geneva-based chairman Mark Ebert and Geneva-based Louis-Armand de Roug?, who serves as senior investment advisor and business development director for Europe.

Ebert is the former head of investment banking at Lombard Odier Darier Hentsch & Cie, while de Roug? most recently led the alternative asset manager Richcourt Fund Advisors, part of Citco Group. Early in his career, de Roug? also helped develop MATIF (March? ? Terme International de France), the French futures exchange and clearing house.

David Suratgar, the chairman of London-based, Africa-focused BMCE Bank International, serves as chairman of

Milltrust?s advisory board.

Also in London are Milltrust investment directors Alexander Kalis and Eric Anderson, who in 2009 founded the emerging-markets investment research group Think Alternative Advisors, which has been acquired by Milltrust.

Kalis is a veteran of the Asia alternative investment teams of Banco Santander and LCF Edmond de Rothschild Asset Management. Anderson helped manage due diligence for Credit Suisse and worked previously at the Hong Kong-based hedge fund Ortus Capital.

Milltrust appears to be the first managed-accounts platform to focus exclusively on emerging markets. Others include the space within their larger pools.

For example, Amundi Alternative Investments breaks down the more than 170 hedge funds on its US$12.4 billion platform by strategy type, though many focus ?mainly? or at least ?actively? on emerging markets, according to an Amundi spokeswoman. About US$2.3 billion of the total platform is held in managed accounts.

Managed accounts, which give investors more control than commingled funds, are particularly popular in emerging markets.

Fund-of-funds manager Permal Group accesses more than 80% of its roster of underlying China funds through managed accounts, compared with roughly a third of its funds globally, as reported.

In promoting relatively small managers in Asia, Milltrust bears some similarity to Hong Kong’s DragonBack Capital, a former hedge fund that relaunched earlier this year as a full-service outsourcing platform. DragonBack’s founders also hope to bring their managers ? at least three so far ? more attention from overseas institutional investors, which tend to give assets to a limited number of larger players.

The key driver for DragonBack, however, is providing those managers the operational infrastructure necessary to survive the due diligence process. In contrast, Milltrust’s managers will likely stand on their own already but need a partner to help win and appropriately service mandates in Europe and the U.S.

With an emphasis on the liquidity of managed accounts, Milltrust is not focusing solely on hedge funds, despite the background of its founders. But it may pursue strategies that require the flexibility of an alternatives platform.

The firm favours ?unconstrained, flexible mandates that can use hedging techniques?, says Hopkins. ?We want to get away from passive investment management as [much as] possible, as this is indiscriminate and inefficient and will get beaten up every so many years.?

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