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Ex-Lehman Trader to Start Credit Hedge Fund as Banks Pare Risks

Date: Friday, June 26, 2009
Author: Netty Ismail, Bloomberg

Assan Din, a former Lehman Brothers Holdings Inc. credit trader, is setting up a hedge fund to trade corporate bonds and derivatives in Asia.

SaKa Capital’s fund, which will have a capacity of more than $500 million, will start in September with $25 million to $50 million sourced mainly from founding members and friends, Din, 38, said. The Singapore-based firm will subsequently raise capital from institutional investors, including U.S. pension funds and endowments, once it builds a track record, he added.

“We chose Asia because we believe over the next few years there will be a lot of great opportunities to make money in the credit markets here,” Din, who ran Lehman’s credit trading businesses in Europe and Asia from 1998 till 2006, said yesterday. “If there is any region that is going to grow, it will be Asia.”

SaKa Capital, named after the ancient nomadic tribe that conquered parts of Asia, is seeking to take advantage of trading opportunities in credit markets as financial companies become more averse to risk. Financial institutions worldwide have reported almost $1.5 trillion of losses since the U.S. subprime mortgage market collapsed, data compiled by Bloomberg show.

“The days of large principal businesses at banks competing with hedge funds is over for the foreseeable future,” Din said. “Banks and existing funds are suffering from illiquid legacy positions on their balance sheets and hence are handicapped to take advantage of the credit opportunity today.”

Uncertainty, Opportunity

The SaKaCapital Liquid Credit Fund will target annual returns of about 15 percent, with “moderate leverage,” said Din, who joined Lehman in 1997 as a credit derivatives trader in London. Lehman in September filed for the biggest bankruptcy in U.S. history.

He headed European and Asian operations for Lehman’s $8 billion global principal strategies group, and helped set up R3 Capital Management LLC in May last year when Lehman spun out the unit. He left R3 before the hedge fund was taken over by New York-based money manager BlackRock Inc. in April this year.

Din was Lehman’s London-based head of European credit trading from May 2004 to June 2006, after running the bank’s credit trading business in Asia outside of Japan for six years.

The fund will trade corporate bonds and derivatives, convertible debt, credit indexes as well as options, focusing on securities that are liquid, or are easily traded, Din said. It will also use equities markets to hedge.

“There’s still a lot of uncertainty in the markets and a lot of opportunity to make money right now, particularly in credit markets,” Din said. “It’s a great time to make money in the markets; it’s not the best time to raise money.”

Benchmark gauges of corporate credit risk rose earlier this week after the World Bank warned the global recession will be deeper than previously forecast.

To contact the reporter on this story: Netty Ismail in Singapore nismail3@bloomberg.net.