By Teh Shi Ning

A NEW fund set up by Temasek Holdings unit Fullerton Fund Management and Japan's SBI Holdings aims to buy undervalued assets in the Asian financial sector.

Launched on Thursday, Fullerton Asian Financials Fund will invest in listed securities of banks, financial services and real estate companies, and trust funds in Asia ex-Japan. It has attracted an initial commitment of US$60 million, with plans to raise assets under management to US$100 million by May 2009.

The fund's Singapore-domiciled unit trust master fund will be managed by Fullerton. Its Japan-domiciled unit trust feeder fund will be managed by SBI Asset Management.

Fullerton expects the fund to benefit from the drivers of Asia's long-term growth - a growing middle class, expanding consumer credit, rising loans and increasingly attractive valuations of regional financial stocks.

Its chief investment officer, Chan Chia Lin, said: 'Despite Asian banks' limited exposure to the US sub-prime debt, their share prices have declined in line with the global sell-off in equities.' The new fund seeks to invest in fundamentally sound but mispriced companies, as well as emerging leaders.

Fullerton, headquartered in Singapore, has two research offices in China and Vietnam and two joint-venture fund management companies in India and Pakistan. Its collaboration with SBI Holdings, the core company of Japan's largest venture capital group, SBI Group, will also 'offer Japanese investors access to a broad portfolio of opportunities in Asia's growing financial sector', said Fullerton chief executive Gerard Lee.

This article was first published in The Business Times on October 4, 2008.