Draft:Silverdale Capital

Silverdale Capital is a global investment management firm headquartered in Singapore. Established to cater to sophisticated investors, the firm specializes in fixed-income strategies, treasury and bespoke solutions for corporate clients. Silverdale Capital is known for its innovative approach to fixed income, particularly through their fixed tenure funds. It managed over a billion dollars of assets.

It was incorporated in early 2000s in London & Geneva and offered merchant banking and asset management. Later, it transformed itself into a fund management company offering fixed income solutions.

History

The Silverdale Group was established in London (UK) & Geneva (Switzerland) in early 2000 as a boutique Investment Bank and an Asset Management firm. Silverdale channelized over US$ 4 billion of investments in emerging markets, quickly captured 83% of global market share in Indian convertible debenture issuances and forged asset management joint ventures with Goldman Sachs, Morgan Stanley and Lehman Bros.

After the financial crisis, in 2008, Silverdale started its Singapore operations. Silverdale Capital holds a Capital Markets Services (CMS) License No. CMS100511-1 from MAS for fund management. Silverdale was one of the first and largest Variable Capital Companies (VCC) in Singapore, and advised the Monetary Authority of Singapore to shape the regulations in September 2018.

Silverdale Capital VCC advises several funds: Silverdale Bond Fund, Silverdale Fixed Tenure Funds, and Silverdale Credit Opportunities Fund. It also offers Silverdale Bespoke Solutions to its clients, who are frequently family offices. VCC structure is often preferred by family offices to trust structure. A VCC is a corporate/legal entity, meaning it can operate independently and act on its own behalf without requiring the appointment of a trustee. This provides significantly greater flexibility compared to unit trusts or similar structures.

Investment Philosophy

Silverdale Capital's approach to investment is centered around including:

• Legal Review and Adjunct Payment Waterfalls: Beyond credit filters like ratings and yield-to-maturity, Silverdale prioritizes the legal review of bond covenants. They frequently publish takes on debt levels and are covered in the news for this.
• Cash Flow Modeling: Utilizing a cash flow model based on fungible cash rather than standard IFRS or US GAAP accounting practices.
• Risk Management: Employing a system that focuses on duration management, diversification, and optimization to protect investor wealth during systemic failures.
• Transparency and Agility: They publish all their holdings on a regular basis.
• Leverage: Uses leverage to enhance returns in fixed income, which can otherwise be low.

VCC vs. Trust Structure

A Variable Capital Company (VCC) is a corporate structure for investment funds in Singapore, established under the Variable Capital Companies Act 2018 (Act 44 of 2018). It can operate as a standalone or umbrella fund and is regulated by the Monetary Authority of Singapore (MAS). VCCs offer benefits such as legal segregation of assets and liabilities between sub-funds, tax exemptions on income and capital gains under the Income Tax Act, and access to Double Taxation Avoidance Treaties (DTAT) with over 80 countries. VCCs also allow flexibility in investment strategies, with no restrictions on asset classes, and offer easier remittance procedures for both domestic and international transactions. Furthermore, VCCs provide enhanced confidentiality for investors, as their register of members is not publicly accessible, and can be structured as open-ended or closed-ended funds. These features make VCCs an attractive option for fund managers and investors, particularly when compared to traditional fund structures or offshore jurisdictions facing increasing regulatory scrutiny. This has been a pull factor for family offices to be attracted to Singapore and some of Silverdale's key clientele to pursue mandates with them.

At the same time, Silverdale has also been quoted in the media for sharing the challenges of VCC structure.

Using Leverage

Silverdale's strategy has gained a lot of traction primarily due to their unique use of leverage. A leveraged bond fund strategy involves using a loan to buy (more) bonds. This means that they are able to take advantage of the natural delta spread, strategic rate trading, take advantage of hyper competitive infrastructure credit lines, get the opportunity to partake in opportunistic market entry, and decrease risk, while maintaining a high sharpe ratio.

This leverage adds volatility to a portfolio; however, a prudential amount of leverage can be more advantageous compared to an unleveraged bond portfolio.

Key People

Sanjay Guglani

Sanjay Guglani is the Founder and Chief Investment Officer (CIO) of Silverdale Capital. Sanjay has contributed to the financial sector by holding leadership roles and launching one of India’s first portfolio management schemes. His investment approach is focused on risk-management, per Straits Times. Guglani's views are frequently featured on Bloomberg, Reuters, The Business Times, Hubbis, etc. He also served as a delegate of India at the United Nations in 2001.

Aseem Arora

Aseem Arora, President of Silverdale Capital, heads the firm’s business strategy and development. He previously worked at Merrill Lynch, Citibank, and Bank of Singapore and frequently discusses impact of changing financial landscape on the news.

Corporate Culture

Silverdale fosters sustainable growth by supporting holistic development for its team and the community, including initiatives such as sponsoring the SMU-Silverdale Award of Excellence in Fixed Income. Its leadership frequently contributes to academic and professional forums, including guest lectures at NUS and SMU.