Erste Bank AG, Austria's second-biggest lender, started a hedge fund that will invest at least 40% of its capital in Central and Eastern Europe. The Maximum Emerging Alpha Fund began investing with $30 million of Erste's own capital on October 1, the company said in an e-mailed document yesterday. It aims to make money by investing in hedge funds active in central and eastern Europe as well as by giving hedge-fund managers from the region and other emerging markets seed capital for their funds. It will also invest directly in emerging-market financial instruments.
Vienna-based Erste, which has more than $1.3 billion in hedge-fund assets, has put Eastern Europe at the core of its growth strategy. Last week it paid $2.76 billion to complete the acquisition of Banca Comerciala Romana SA, Romania's largest lender. Between 25% and 35% of the Maximum Emerging Alpha capital will be used to seed new funds, and the fund expects to invest in between 20 and 30 hedge funds at any given time, the company said. Direct investments are expected to amount to no more than 1% of the fund's portfolio which includes stocks, bonds, futures and options contracts, according to Erste. Investors will be required to keep their money in the fund for a year initially, then they will be allowed to withdraw funds every three months. Hedge funds tend to be private pools of capital that let managers participate substantially in the gain or loss of the money invested. Most investors pay a 2% fee to have money invested in a hedge fund, whose managers tend to keep a 20% slice of any money they make. (Bloomberg)