SAIL Seeks 'Liquidity Premium' From Illiquid Hedge Funds

Oct 12 2010 | 1:09pm ET

Fund of hedge funds firm SAIL Advisors plans to invest more of its assets in less liquid hedge fund strategies, and may dip its toes into the hedge fund secondary market.

The Hong Kong-based firm said it will consider hedge funds with lockups of up to two years for its US$1.2 billion Flagship Fund, Bloomberg News reports. The firm is also looking at the secondary market, hoping to snap up attractive investments at a sizeable discount.

"There are some assets, some opportunities out there that are just very attractive, but people don't have the appetite to go after that," CEO Vincent Duhamel told Bloomberg. "We have capital that is very long term. We can earn a liquidity premium because we're willing to commit longer term."

As for stakes available on the secondary market, Duhamel pointed to funds with redemption restrictions and side-pockets.

"Sometimes there are some pretty good assets behind that," he said. "It's just a question that it's going to take more time before you can achieve higher returns."

SAIL's move towards less-liquid funds comes as it seeks to differentiate its Flagship from the US$557 million Topaz Fund it took over from ING Groep earlier this year. Topaz features monthly liquidity, as opposed to quarterly for Flagship, making it harder for the former to invest in illiquid funds.


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