Interview with Christopher Peck, Partner & Portfolio Manager at Maiora Asian Structured Finance Fund

Maiora Asian Structured Finance Fund Uploaded on Mar 14, 2016
Maiora Asian Structured Finance Fund – Christopher Peck has been in the industry with 16 years of experience in Japan and Singapore and currently focuses on resources and mezzanine debt at Maiora Asset Management.

Maiora Asset Management is advisor to the Maiora Asian Structured Finance Fund which invests mostly in primary loans with outstanding risk reward characteristics across Asia Pacific. The fund focuses on Japanese Mezzanine Real Estate debt, but has also provided a bridge loan for solar plants in Japan as well as a senior loan in an Indonesian coal mine.

Maiora Asian Structured Finance Fund


0:00today were talking to mister Chris for pay the principal asset management major
0:10asset management is the advisor to the Asian structured finance fund which
0:13manages just under a hundred million dollars invested in structured financing
0:18opportunities in Asia and in particular a Japanese name real estate debt
0:22incepted in November 2013 the funders had impressive returns far surpassing
0:29the averages over the hedge fund industry with relatively low volatility

Maiora Asian Structured Finance Fund
0:33so christopher welcomed today how about you you start off and tell us a little
0:41bit about your background and how he transitioned into fund management and
0:44okay yeah I moved to Japan and 2005 spent a total of eleven years at
0:51Deutsche Bank the first three of those were at an asset manager in New York
0:55which they acquired that’s why I moved to Japan in 2000 and I was worked on the
1:01trading desk for quite a long time and the gray hair you know following the
1:08global financial crisis I was actually hired back by Deutsche Bank to to run
1:13all of their risk the equity and agreed room inside the transition of fun fun
1:17management i think is a national natural progression for for you know for sure my
1:22career path obviously we were running relatively robust products and books at
1:29the bank

Maiora Asian Structured Finance Fund
1:29you know and I kind of saw this opportunity we’re simplifying the
1:36investment process I thought would be a real real way to build a business over
1:40the next ten twenty years right so moving its asset management we pulled
1:44out some of the strategies that we’re looking at the mezzanine just to mention
1:47a strategy which we really like it’s kind of a natural progression so I’ve
1:51been in Singapore for two years in particular was
1:55Japanese mentioning real estate financing of all the areas of investment
2:01you exposed to it in Japan well why did that when you stand on a particular when
2:06we started the the mezzanine finance business in in japan is October 2009
2:12you know you can’t you can imagine and I was hired in August 2009 coming out of
2:18the GFC to sort of help with some of the problems that we have on the desk and
2:23evaluate became wildly unpopular with management like pressing why we needed
2:28to get back into this business immediately write some basic stuff there

Maiora Asian Structured Finance Fund
2:33you know I looked actually at the problems in the real problems that
2:38investors and traders in people had in the in the financial crisis with how
2:44they were recovering their assets in the different types of products that were
2:47out there and available I looked it looked at a setback landing in Japan
2:52said well Japan Japan didn’t have the leverage that going into the GFC the
2:58rest of the world had had been deleveraging for you know twenty years
3:02prior to that I mean obviously the GFC wasn’t great for Japan but still the
3:07actual absolute leverage was quite low so we said ok well it looks like there’s
3:13a decent opportunity here because there’s not very much talent left
3:18comprehensive the global financial crisis and we just won back some very
3:23very basic very basic principles and investing what are we getting paid what
3:28are we getting paid for capital and what’s our security what’s that the
3:32actual way we’re going to get our money back if we have another human event and
3:37obviously in 2009 October that was very pretty pretty fresh in people’s minds
3:43right and so that’s how that’s how this business started right without the
3:48capital would be rare we were lending money against real assets it was a
3:52function that the banks are expected to do to provide society everyone needs a
3:58place to live and we just we sort of stuck with it in
4:02subsequently you know a lot of a lot of different factors and evolve as we
4:07started looking into the opportunity that that made it quite attractive so
4:11the landscape of mezzanine financing Japan is change since 2000 financial
4:15markets are perpetually evolving and in fact they they evolve the company into
4:21the internet they evolved a lot quicker now in japan specifically the mezzanine
4:26market was quite
4:29was actually nonexistent prior to about two thousand and nine and the reason was
4:34one japanese banks were generally relatively aggressive in lending up to
4:41the 90% loan-to-value mark and secondly there just been a massive outflow of
4:48foreign bank in in in Japan institutional malaise in Japan after
4:52twenty years of deflation

Maiora Asian Structured Finance Fund
4:54subsequent to that you know the markets there’s been a few players that have
5:01come back and forth but but really it’s been largely largely untouched we’re
5:06seeing up in comics sort of bring back more capital to the market so it’s it’s
5:10starting to evolve to become more mature but really the mezzanine market in japan
5:15is in in the way that we look at it is quite new maybe it would be helpful for
5:19you know have used to give us an example of a typical trade or when you may have
5:24done like to go back to to to the to the first trade that we did the reason why I
5:29like to go back to the first trade because again it was of the the
5:34institutional pleasure that it was to try to drag this this trade through and
5:39through through credit risk management 1 but there’s a phenomenon that existed in
5:44Japan where this exists in most most most real estate markets around the
5:49world where central cities and and capital type places trading at a premium
5:55to sort of the secondary ancillary cities around the world I mean it’s the
5:59cap rates and London vs can’t do what it was like this like this
6:03York City vs hartford connecticut the temperature difference so we had a
6:06situation in Japan one of our borrowers was asking for relationship we have for
6:11a while was asking for
6:13alone to make an acquisition of a store where the sole tenant was Apple Store
6:20happen to be located in Sapporo where the the relative cap rates were about 66
6:25percent for Tokyo and 9% for support at that time and hence there was quite a
6:31bit of cash left in the in the capital stack to charge for a mezzanine we kind
6:36of took the view that the corporate credit in math home was better than
6:42lending Tuesday as supermarket chain
6:44sitting in Tokyo right so we actually see we understood the reason why the
6:49debt was priced wrong and you know we made that loan and pay back the hands of
6:56labor just one of those things where you at that time at that point I’m the banks
7:01just weren’t lending they would go to people for for financing again 2009 and
7:07they’re focused like ok we can only lend to kill so we’re not looking there was
7:11nobody call right call and so that was nice seeing lending money to japanese
7:17real estate
7:18let’s take worst-case scenario Jesse 2.0 you know liquidity go goes to the floor
7:27you know redemptions all these problems
7:30sure the risk for an investor in your hand
7:37GFC jus I think it’s GFC 2.0 is has how are you and I i think you know we
7:44created this investment strategy off of coming out of the back end of living
7:51through the global financial crisis I keep in mind I mean I was i’ve seen some
7:56pretty large dislocations in Japan I mean I was sitting on the trading desk
7:59during during nuclear meltdown watching things happened so we have a pretty good
8:03idea of how temporary and the long term dislocations can affect the pricing and
8:10what we do we underwrite relatively conservatively aggressively as as
8:18lenders and we are first dollar lost one of the investment mechanisms that we
8:23have as we look for our first dollar lost and not exceed the price of where
8:28these assets were during the global financial crisis so we have some pretty
8:32good data around real estate prices about where things buildings in relative
8:37comfort were trading at those levels and if our cash flows they’ll make it we can
8:42justify selling this asset at or below where things traded post Lehman we don’t
8:49that the nobel for us so we’re we’re pretty comfortable with our underwriting
8:53and if it you know we have a negative situation where we actually need to take
9:01the keys of the building and go through a resolution in in the courts the
9:08outcome is favorable favorable covenants in the mezzanine lending space in japan
9:13the outcome is we’ve bought a bunch of buildings at 65 cents on the dollar but
9:19they’re hard assets you know I’d say I’d say one thing I’m very very pleased
9:25compared to all the different things I’ve done regarding different types of
9:29strategies to manage that this is the one that makes me kind of sleep well at
9:33night
9:34ok thanks okay so it’s just coming to a close up a couple questions maybe you
9:39could just tell us a little bit more about your your your team that partners
9:43and less lawyers involved in the process we have a significant presence in Tokyo
9:48we have an office there
9:52managed by two senior partners of my aura one is a Japanese national trained
9:58accountant barred lawyer the other partner that there is a sort of mixed
10:04product specialists was doing some credit some credit work at Deutsche Bank
10:08as well where former colleagues and his various real estate supports that there
10:13for them as well
10:14legally legalize all the documents are generally are driven by a mile
10:20so through the loan documentation process driven by us of course we use
10:23external counsel pictures you know the high-level I were warriors and we can
10:29get our hands on that typically to believe or trust until given singapore
10:35we’ve got three Japan centric partners I’m one of them
10:39the manager of the fund we’ve just recently added Scott right hire from
10:44Pine River in hong kong to help us with a COO and we’ve got to mars yo piling
10:50who was the former head of global markets for Deutsche Bank in Japan and
10:55Singapore as well
10:56any travel plans coming up any we travel quite quite frequently in Japan very
11:02very often a week a month of being mean to kill ok great thanks

 

Maiora Asian Structured Finance Fund
Maiora Asian Structured Finance Fund