BEST CUSTOMISED FUND MANAGEMENT COMPANY – SOUTH EAST ASIA

AI Fund Awards

Founded more than 10 years ago, S.E.A. Asset Management is a fund management boutique based in Singapore offering customised asset and fund management solutions, asset management for segregated accounts and UCITS compliant Luxembourg SICAV investment funds. We caught up with Alex Zeeh to learn more about the firm and the funds it offers.

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Established in 2007, S.E.A. Asset Management is an independent financial services firm offering customised asset and fund management solutions for private and institutional clients. The firm invests in fixed income and equities in the wider Asia Pacific region with a bottom up fundamentals investment selection approach. Alex discusses the Asian short duration bond strategy that the firm provides utilising this innovative investment approach.

“Just over three years ago we launched a Luxembourg umbrella fund S.E.A. Funds SICAV replicating our expertise in Asian equities and fixed income. Previously, we had seen a niche in investing in Asian short duration high yield bonds with a buy-to-hold until maturity strategy – the S.E.A. Asian High Yield Bond Fund. This fund can invest in non-benchmark index issues which allows it to select bonds with higher yields and shorter duration than ordinary benchmark tracking Asian high yield funds. We select bonds mostly in the BBB to B rated range but also have a large allocation to bonds of unrated issuers. But only if we feel have a high credit worthiness and are not sensitive to the rate hike cycle. Currency risk are fully hedged at all times

“Unrated bonds denominated in Singapore dollars are typically issued by small or medium sized companies that operate regionally. The issuers target only local investors who are usually familiar with their business. Due to a lack of international investors for Singapore dollar denominated issues, alone small issues of sometimes only 50 million Singapore dollars, these issuers usually do not bother obtain a credit rating by the major rating agencies like Moody’s or Standard & Poor’s or Fitch.
However, being unrated does not automatically imply a bond is untrustworthy. In fact, quite a number of these issuers have solid cash flows and balance sheets making their often very short tenors very attractive. This allows it to deliver a superior Sharpe ratio in the medium to long term in comparison with ordinary Asian high yield bond funds by the large mainstream fund houses. In addition, we hedge all currency risk and provide daily liquidity. We have never had any defaults since inception. Our target portfolio yield is 6-9% with an average duration of 1.5-2 years and an average rating of single B” It is this innovative approach that has helped drive the firm to the success it enjoys today, as Alex highlights.

“Our strategy investing into Asian short duration high yield bonds is unique and we have been the first to launch this as UCITS SICAV. Other wealth managers focus on equities strategies in Asia. The giant mainstream fund houses have large and expensive distribution forces. They are forced to develop products that are very scalable to spread their costs. This forbids them to enter our benchmark free niche. We do not foresee competition in the near term. S.E.A. Asset Management on the other hand is a very lean organisation with a low cost structure. This allows us to develop niche strategy products while still operating profitable.”

Looking to the future, the firm will be seeking to capitalise on the success of its approach and drive further growth in this constantly evolving market, as Alex is proud to conclude.

“Currently in the fund industry we are seeing an increasing number of smaller wealth managers starting up in Asia. Europe for example, with Switzerland in particular sees the number of smaller fund or wealth managers shrinking. Mifid 2 is forcing many small firms to return their licenses. We ourselves are in cooperation discussions with a Swiss wealth manager who is interested to relocate its operations to Singapore. Our small size makes us flexible and our lean organisation does not burden us with unnecessary costs. This allows us to be focused and be successful in our strategies.

“To capitalise on this success, at S.E.A. Asset Management we have recently entered a distribution partnership with a medium bank in Switzerland. I expect strong interest from retail investors, for whom we recently launched our EUR hedged retail tranche. These developments will offer us some exciting opportunities for further growth and success which we look forward to taking advantage of.”