GIC said to pledge $100 million to ex-employee’s hedge fund

Singapore sovereign wealth fund GIC will invest up to $100 million to Lauro Asset Management, a hedge fund started by David Mercurio, a former employee who worked at the fund for a decade, according to people familiar with the matter.

GIC has backed the long/short equity fund founded by Mr. Mercurio, who left the fund in 2011, according to the people, who asked not to be identified because the matter is private. GIC will invest as much as $100 million, capped at 50% of the fund's assets.

Lauro had $35 million under management as of April, according to documents obtained by Bloomberg. Mr. Mercurio's Singapore-based fund returned 4.7% in the first four months of this year, in line with the average 4.5% gain for equity long/short funds, according to data provider Eurekahedge.

GIC is turning to alternative assets including private equity, hedge funds and real estate to boost returns amid expectations low interest rates will weigh on earnings in the coming decade. Low yields, modest global growth and inflated valuations for many assets may curb returns for as long as 10 years, the state fund said in its latest annual report.

GIC has estimated assets of more than $300 billion.

GIC has injected money in other hedge funds started by former employees. It seeded Avanda Investment Management, co-founded by Ng Kok Song, former group chief investment officer, in 2015. In 2012, the wealth fund backed Nuvest Capital, set up by Aje Saigal, a former CIO of global equities.

A spokeswoman for GIC declined to comment. Mr. Mercurio, in an emailed statement, said that “Lauro does not comment on any client related matters.”