SAIL Advisors, a major hedge fund business operating in Asia, spoke to this publication recently about its work, strategy and outlook.

SAIL Advisors is a global alternatives investment firm that manages $2.3 billion in portfolios of hedge funds and has over 30 employees. SAIL offers various global and Asian funds, along with customised portfolio services and consulting on hedge fund investing to clients around the globe. With offices in Hong Kong and New York, it concentrates on identifying hedge fund managers with strong alpha generation globally. It is part of the the Search Investment Group. John Williamson is chief executive of SAIL Advisors.  Prior to his appointment in 2007 as chief financial officer of Search Investment Group, the private investment company of Robert W. Miller and his family, Williamson was a managing director and head of infrastructure of Morgan Stanley Asia. Before taking up his Morgan Stanley role in 1998, he was chief operating officer of NatWest Securities Asia Holdings Limited, a position he had held since 1994.  He began his career in the securities industry in Edinburgh at stockbrokers Wood MacKenzie & Co. Ltd. in 1983.

This publication recently caught up with Williamson to ask about SAIL and its business and how the hedge fund environment is at the present time.

You have a range of portfolios of various funds, or funds of funds. How would you best describe what your business is and does?

Given the increasing number and complexity of hedge  fund investments, a high quality fund of hedge funds manager will bring  four main value propositions to their investor: consistent alpha generating manager selection, strong investment risk management, in-depth operational due diligence, and meaningful diversification. As an asset class, the appropriate hedge funds exposure provides an enhancement to your portfolio return drivers. Also, through a fund of hedge funds vehicle, one can gain access to multiple hedge fund managers with relatively small investments.

Where do you see your main strengths? What unique selling points do you have for investors?

Our strategies adds value for investors by typically maintaining a diversified portfolio of high quality hedge fund investments with a focus on smaller, “non-brand name" hedge funds, which are able to generate high alpha while running liquid and dynamic investment strategies that can adapt to rapidly changing market conditions. The strategies are managed by a seasoned team of capital markets and risk management specialists that have a proven long-term track record of strong-risk adjusted returns. We run investment strategies that focus on maximizing alpha generation whilst tightly controlling market beta exposures. To date, SAIL funds have never been invested in hedge fund frauds or blow-ups.

Are there particular performance figures that you can give, or can you at least give some indication of performance if specific figures are not disclosable?

Our performance figures tend to be strong on a risk adjusted basis. The funds that we currently offer, include a global multi-strategy fund (SAIL Topaz Fund) with a target return of Libor +400-500 basis points and an Asian long short equity strategy fund (SAIL Asia Equity Alpha Fund) which has a target return of +12 per cent.  In 2013 our return net of standard fees was 11.16 per cent for Topaz and 18.95 per cent for Asia Equity Alpha.  As of July this year, the Topaz strategy has an annualized volatility of 4.38 per cent since inception in May 2001, and the Asia Equity Alpha strategy has an annualized volatility of 5.66 per cent since its inception in Aug 2011.

What are your fees and charges?

The fees can range depending on the type of share class, size of investment, and investor requirements. We work with investors to offer competitive fee schedules in today’s markets.

To whom do you sell your funds (private banks, family offices, endowments, foundations, pension funds, other)?

We have different types of clients including large financial institutions, private banks, family offices, pension funds, etc. across different countries. Lately, we have seen increasing interest for our offerings from private banks and family offices, especially from the Asian and European regions.

Can you discuss your views a bit about the state of the Asia/other markets at the moment in terms of what you see as trends: we have seen a new Indian government pledged to make radical change, and a China government trying to wrestle in the excesses of "over-investment". Elsewhere, there is a mixed picture, and of course the background noise of the US winding down its quantitative easing programme. What is the "house" view at your firm about all this?

Our current view is that the US continues to track for stronger growth in the 2nd half of the year. However, the concerns are around whether the economy is growing too quickly, and if the Fed will have to raise interest rates earlier than expected.

In terms of Europe, it appears that the economic growth witnessed earlier in the year is beginning to slow down, but this increases the likelihood of additional stimulus by the ECB, including the start of an asset purchase program. An important factor to consider is the geo-political impact of the Ukraine situation as it has already had a negative impact on CEO and consumer sentiment.

For China, it is looking stronger as the “mini-stimulus” kicks in and the property market is showing early signs of stabilising.  Our view is that there will be a soft-landing for the Chinese economy. Recent economic data has turned positive, but it is still too soon to have a high confidence level.

Meanwhile Japan’s economic data still shows uncertainty and the initial optimism around “Abenomics” is beginning to wane, particularly as Abe’s popularity is falling. Market expectations are for more Central Bank action if economic growth slips.

Where do you see your business within the Asia-based hedge fund industry?

As one of the earliest Asian hedge fund investors, we continue to see the fund-of-hedge-fund business within Asia growing. As qualified investors become more sophisticated and look to diversify away from traditional products and overseas institutions look to increase their Asian exposure, there is a growing interest for alternative strategies such as hedge funds. In terms of investment opportunities in Asian hedge funds, we tend to have preference for smaller/mid-sized managers, with long/short managers having some of the best opportunities to generate alpha.

What are your total assets under management? How many staff do you have? Are there growth targets?

We currently manage approximately $2.3 billion in AuM, which makes SAIL Advisors one of the largest Asian based fund-of hedge funds in terms of AuM. Our firm has over 30 staff, with teams based in both New York and Hong Kong.  As our culture and process is investment led and focused, we plan to maintain reasonable AuM growth subject to the strategies’ capacity constraints.

Why do you say that your business has something good to offer to wealth management clients?

With family office origins, our founding principle is to compound wealth with attractive risk-adjusted returns. The firm has evolved into an institutional grade investment organisation attracting institutional investors worldwide, including pension funds, insurance companies and banks. Today, SAIL Advisors continues to maintain wealth management at the core of its services and offerings.

We also co-invest sizable investments in our strategies. This provides an alignment of interest in our commingled offerings with our clients.