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March 13, 2019  

Ascalon Maps Asia-Focused Seeding Vehicle

Ascalon Capital’s new owner aims to raise up to $500 million for a drawdown fund that would offer seed and acceleration capital to hedge fund managers in the Asia-Pacific region.

Generation Development Group, a Sydney alternative-investment firm that closed on its purchase of Ascalon last month, has begun marketing the planned Ascalon Growth Catalyst Fund with the aim of holding a first equity close before yearend. To lead the effort, Generation hired long-time Credit Suisse executive Myo Schollum as chief executive of the hedge fund-seeding unit.

Ascalon’s previous chief executive was Chuak Chan, who joined the Sydney firm in 2011 and executed a series of seeding deals funded by its former owner, Australian bank Westpac. Chan remains on board at Ascalon as chief investment officer and executive chairman.

The new fund would take positions in hedge fund startups and emerging managers

in Asia and Australia, in exchange for revenue-sharing agreements. Ascalon is targeting an internal rate of return of 10-12%.

The funds Ascalon previously seeded generated a blended annualized return of 6% from August 2012 to March 2018. The return Westpac earned on those investments presumably was higher.

Generation, a publicly traded company with a market capitalization of A$75 million ($53 million), views its purchase of Ascalon as a potentially “transformative” deal. Until now, its primary business has been developing tax-efficient fixed-income strategies for wealthy investors in Australia. Generation, formerly known as Austock Life, was managing A$992 million at yearend 2018.

The company is led by executive chairman Rob Coombe, who has long been involved with Ascalon. In 2009, when he was head of Westpac’s BT Financial unit, he led a deal to acquire full ownership of Ascalon from Kaplan Equity. Westpac previously owned a 50% stake in Ascalon. Coombe left Westpac in 2011, and later ran a group of restaurant chains owned by private equity shop Archer Capital. He joined Generation in 2017.

Ascalon still holds positions in two fund-management businesses: a 33% stake in mutual fund operator Morphic Asset Manager of Sydney and a 30% interest in Deepwater Capital, a Hong Kong shop that runs a China-focused long/short equity strategy.

Ascalon exited its other four seeding deals starting in 2018. The other managers were Athos Capital, Regal Fund Management, RV Capital and Seyon Capital. The funds backed by Ascalon had combined assets of more than A$1 billion.

Few other hedge fund-seeding businesses are focused on Asia. The most active in the region is HS Group, led by former Blackstone executive Michael Garrow. The Hong Kong firm currently is deploying capital from its second fund, which finished raising $1.8 billion last year.

Limited partners in Ascalon Growth Catalyst Fund will pay three layers of fees: a 1% management fee; a 12.5% fee on the fund’s portion of revenue earned by the underlying managers; and a 10% cut of the profits from investments in the underlying funds.