French hedge fund incubation and seeding company NewAlpha Asset Management recently linked with South Korea’s Woori Absolute Partners to offer a hedge fund seeding venture in the Asia-Pacific region.

Global hedge fund incubation specialist NewAlpha has formed a joint venture with Woori Absolute Partners (WAP), a Singapore-based alternative investment management company, in order to access Asia-based managers.

Although the Asian market is attracting a lot of attention from investors and established hedge fund managers, locally based asset managers are under-represented, said Antoine Rolland, director general of NewAlpha. “There is still an under-representation of people based in Asia compared to those managing funds focused on the Asian market from the US and Europe,” he said.

Rolland said there were many reasons for this under-representation. Top of the list was a “lack of maturity” of the market, although he conceded this is “changing very rapidly”.

He predicted that the kind of asset growth seen in the US in the 1980s and 1990s will be replicated in Asia over the coming 15 years. “We think there will be some big players based there in 10 years. These guys are now managing less than $50 million.”

Rolland also expects to see US and European-based managers migrating to Asia as there will be a need for asset allocators and asset management companies to be locally based. “There has been a huge improvement in the local regulations. The markets are more and more mature and so you are seeing diversification in the different types of strategies you see on the ground. For all these reasons there will be a huge growth in this industry. Therefore, incubation is a good way to find new talent and participate in this growth,” concluded Rolland.

Despite his enthusiasm Rolland is realistic about the scale of the local talent. Fund size remains small. “If you look, like we are, for small asset management companies managing less than $100 million, then you have lots of people. So for us there is no problem to find good managers that are good targets for incubation.”

Having a locally based partner, said Rolland, was important for NewAlpha. “We need to have a local presence. It is very important to be there. When you sell an idea you want people locally based and to show as an Asian incubator that you can follow through and have a local presence.”

Rolland believes there is “strong appetite for this new idea”. “There will be an evolution of the industry and this will start to open to hedge funds. We think we will have some announcements from the regulator soon and this dynamic will push and help us to develop the idea and creation of this Asian incubator.”

Seeding new managers depends on three criteria, according to Rolland. “One is the ability for the managers to make money and the way they adapt the risk to the investment process. There must clearly be a strong investment process and risk management process linked to the investment process,” he explained.

Managers also need to create alpha and have an investment idea that is marketable. “You can a find manager who is very good and makes money but does not have the ability to raise money,” he admits. This could be because it is the wrong time in the cycle for the strategy or simply that the management company is not good at marketing.

The third component Rolland thinks is essential is the ability of the manager to move from being an asset manager into an entrepreneur. “Does he have a long-term view of the development of the business? Does he have only a view on this fund or does he want to create a business? That’s what we are looking at.”

For the future NewAlpha is working on a variety of projects in France and hopes to be able to launch regional and thematic incubation vehicles soon. Rolland also thinks there is a “natural bridge” between hedge funds and private equity and expects to introduce this element to the business model in the future.