Money manager Richard Gadbois is bargain hunting in Asia with a new hedge fund.
His Newport Beach-based Argyle Street Management Americas LLC aims to get investments on the cheap from Wall Street banks suffering from the credit meltdown.
“This is a once in a lifetime opportunity,” he said. “It’s a contrarian play.”
The former “super broker” with Merrill Lynch & Co.’s local wealth management unit once was considered one of the best in the business.
He left Merrill in 2001 to start hedge fund Vantis Equity Associates, where he partnered with Steve Holzman and Home Depot Inc. cofounder Kenneth Langone.
Since closing the fund in 2006, Gadbois went on to start Newport Beach-based Mullin Asset Management LLC, which has about $130 million invested and is ongoing.
At Argyle Street, Gadbois said he hopes to raise $400 million, of which about $40 million likely will come from locals he worked with while at Merrill Lynch.
The rest he hopes to pick up from institutions and family trusts as he travels to drum up business.
Gadbois’ strategy rests on the ability to buy company stakes, real estate and other investments cheaply from banks and hedge funds that need to sell them to make up for losses brought on by the credit market collapse.
Argyle is targeting investments in Asia, Gadbois said.
Hong Kong-based hedge fund Argyle Street Management Ltd., with $900 million under management, is set to handle the investment strategy.
Argyle head V-Nee Yeh is cofounder and chairman of Hong Kong’s Value Partners Ltd., which has about $6.5 billion under management.
Yeh said he believes the weakness in the financial system is similar to 1998 when the collapse of Thailand’s currency sent a ripple effect throughout Asia that created panicked sellers.
“People who bought then made a lot of money as things eventually recovered,” he said.
Distressed sellers, particularly in China, are creating the best opportunity, he said.
“Buying good assets at distressed prices only happens when the sellers are distressed,” Yeh said.
As other bargain hunters look to do the same, Hong Kong native Yeh said he hopes his 24 years in investing in China will help him be the first to snatch up deals.
“We want to avoid getting into auctions for assets,” he said.
Rivals could include some of the best and biggest funds, including George Soros’s New York-based Soros Fund Management LLC and Chicago-based Citadel Investment Group LLC.
Yeh started Argyle Street in 2002 to go after fire sale investments like the ones he sees now.
“Now is the ideal time for us,” he said.
Too High
Up to now, companies looking to sell investments have been asking too high of prices, according to Gadbois.
But now Wall Street investment banks likely will be under more pressure to raise cash, which should make for better deals, he said.
“You need the discipline to not overpay,” Gadbois said. “It comes down to negotiating well.”
The average holding period for his investments could be 18 months, he said.
Gadbois, who has worked from OC for 28 years, has been investing in China since 1981 when one of his clients was the Hong Kong Tourism Board.
Rough Start
His Vantis fund didn’t live up to expectations with a rough start after the 2001 terrorist attacks. The fund made money but not as much as some investors hoped. It had more than $1 billion in assets at one point before money was returned to investors in 2006.
“The longer-term strategy of the fund didn’t sit well with the shorter-term expectations of many holders,” Gadbois said.
With Argyle Street, Gadbois said he’s letting investors know up front that he’s taking a longer-term view.
His other operation, Mullin Asset Management,part of Main Management LLC in San Francisco,has about $50 million managed for friends and family.
It has seen 8% to 10% yearly returns since it started two years ago, according to Gadbois.
By using exchange traded funds,baskets of stocks compiled to mimic various indexes,the strategy is to earn the types of returns seen at big endowment funds, he said.
Endowment funds tend to pull in double-digit returns.
In 2007, Harvard University posted a 23% return on its endowment.
