Jack Yang is moving briskly to expand the hedge fund business of Canada’s largest private equity firm.
The former partner and business development chief at Texas hedge fund Highland Capital Management was recently hired as the managing partner of Onex Credit Partners, the credit-focused hedge fund unit of $12 billion Toronto private equity group Onex Corporation, which is sometimes referred to as the “KKR of Canada.”
Less than a month into his new role, Yang is searching for Manhattan office space, hiring the unit’s first marketers, and considering additional funds for the existing strategies.
“The point is to develop the firm into a larger, institutional-quality manager,” said Yang over lunch in New York City recently. “There’s no reason it shouldn’t be larger.”
Founded in 2007, the $900 million Onex Credit Partners mainly employs an event-driven long/short credit strategy, using no leverage and investing in bank loans, bonds and distressed debt.
Onex established the unit through the purchase of GK Capital in 2007. GK, which then managed $300 million, was renamed after Onex acquired an initial 50% interest (it now has a majority stake).
The unit now manages approximately $900 million in assets in three products: separate accounts ($100 million); a Toronto Stock Exchange-listed fund ($200 million) and the credit hedge funds ($600 million). Onex Credit Partners’ debt opportunity strategy has produced a net annualized return of 9.4% since its inception in July 2001 and is up 4.69% this year.
Yang believes two trends will help grow the business: increased demand for credit strategies and rising allocations from institutional investors to alternatives.
Onex’s existing private equity investors, especially large pensions and sovereign wealth funds, will be central to that growth. Onex has never had a formal marketing program for its hedge funds, nor reached out directly to its private equity clients to cross-sell its hedge fund credit strategy. Yang said Onex Credit Partners can take advantage of a lot of “low-hanging fruit.”
He said the company, as one of the few publicly-traded entities with a hedge fund division and extensive investment track record, is well positioned to earn institutional mandates from investors concerned about the financial stability and operational quality of their managers.
“They care more about the predictability and consistency of returns than what they earn in any given year because they’re thinking long-term about their asset allocation,” said Yang of institutional investor mindsets today. “They have long-term liabilities to focus on.”
Onex’s large cash reserve – approximately $2.57 billion – could help expand the hedge fund platform through seeding new funds or hiring investment teams, although Yang said he is focused on the existing business in the short term.
“Jack brings an extraordinary track record of building and managing world-class credit businesses,” said Gerald Schwartz, Onex’ chairman and chief executive, in a statement announcing Yang’s hire. “We have known Jack for several years, and are delighted to have him join the Onex Credit Partners’ management team. This reflects our commitment to further developing our credit investing platform.”
At Highland Capital, Yang helped grow the firm into one of the largest credit-focused managers after being hired in 2003. He left in 2009.
Prior to Highland, Yang spent eight years at Merrill Lynch, most recently as global head of leveraged finance products, part of the global debt markets division.
—Lawrence Delevingne