June 29, 2010, 9:07 PM EDT
By Tomoko Yamazaki and Komaki Ito
June 30 (Bloomberg) -- Japanese hedge-fund startups are beginning to attract the interest of overseas investors as the nation’s industry has the best performers this year, according to Futoshi Ago at Bank of America Corp.
New hedge funds set up by managers with “long track records with good performance” at their former jobs and strategies focusing on trading skills to profit from rapidly changing markets are luring clients, said Ago, who heads Merrill Lynch Japan Securities Co.’s prime brokerage business in Tokyo. Demand is coming mainly from Asian investors including funds of hedge funds and family offices, he said.
“We’re seeing investors who are willing to put their money from day one if the funds employ strategies that suit their needs,” Ago, who joined Bank of America’s brokerage unit in March to head the business catering to hedge funds, said in an interview in Tokyo yesterday. “Funds being set up by former proprietary traders are also under focus because of their ability to control risks, experience in trading large amounts of funds, and trade rapidly.”
Among the Japan-focused funds starting this year are Alithion Japan Fund, set up by former Mizuho Securities Co. proprietary traders; T&D Japanese Equity Long & Short Fund, managed by former managers at Yunzei Investment Research, a Tokyo-based hedge-fund advisory firm; and the Orix Commodities Fund, headed by Orix Investment Corp.’s chief trader.
‘Under Spotlight’
The Eurekahedge Japan Hedge Fund Index has returned 3.4 percent through May, making it the best-performing index among five regional indexes, according to Eurekahedge Pte. Last year, Japan-focused hedge funds returned 7.2 percent, compared with 20 percent by the global index and 27 percent by the index measuring Asia-focused hedge funds.
“Japan is under the spotlight again amid expectations that there will be a turnaround in the industry,” Ago said. “Investors are also looking to reallocate their investments in China to take profit and pick Japan instead, where there is ample liquidity.”
Ago, who formerly worked for Morgan Stanley’s prime brokerage business, said he also is noticing this year overseas hedge funds coming to Japan to raise money, targeting institutional investors including pension funds.
About 37 percent of Japanese pensions surveyed by JPMorgan Chase & Co.’s asset management unit said they expect to boost allocations to alternative investments, including hedge funds.
Prime brokerage services include matching investors with hedge fund managers, securities lending, asset financing and trading.
Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.
--Editors: Malcolm Scott, Andreea Papuc
To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net; Komaki Ito in Tokyo at kito@bloomberg.net
To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net.
From Bloomberg Business Week published on June 29, 2010, 9:07 PM EDT
