Fixed-income boutique Kapstream Capital has started its new Asian Credit Fund with $50 million in seed money.
"The strategy has been formally launched with $50 million funded by an offshore client in a segregated mandate and it should be available to external investors in August via a Cayman mutual fund company," Kapstream managing director Kumar Palghat told Investor Weekly.
"We expect additional inflows of an additional $50 million by the end of the year."
The new fund will have exposure to 10 Asian investment-grade countries, excluding Japan, with bonds issued in US dollars, euro or yen.
It can have a passive 10 per cent exposure to the currencies of these countries.
The fund will target a return of 9 per cent to 12 per cent a year with a target volatility of 5 per cent net of fees.
The Asian bond market has grown rapidly in the past decade, with Asian local currency bonds taking up about 8 per cent of the global market.
The growth of the bond market is likely to continue as Asian economies keep growing, while the European and United States economies continue to struggle.
"Given the macro-economic situation that US and European investors are facing in today's environment, we expect Asia to be the beneficiary of flow of funds from both the regions," Palghat said.
"Investors are also looking to diversify their current fixed-income allocation to regions with positive economic fundamentals and Asia looks very attractive."
Kapstream, which is 25 per cent owned by Challenger Financial Services, has about $4 billion in funds under management, of which $2 billion is in the firm's absolute return strategy and $2 billion in traditional mandates.
