Institutional Investor's Alpha Magazine - December 2007/January 2008 - (Page 37)

Proﬁle Asuka Asset Management Living on Hostile Ground By Kevin Hamlin It is into this stunted market that Taniya and his partners have ventured with Asuka. Their struggles over the past ﬁve years illustrate the persistence and creativity needed to operate a hedge fund in Japan. Managers of Japan-based hedge funds must cope with operating costs that are among the highest in the world, a risk-averse high-net-worth segment and an institutional bias toward brand-name asset managers Tokyo-based hedge with foreign addresses. To survive, Asuka has traded on fund manager Asuka its own pedigree as the offAsset Management shoot of a major U.S. f irm and diversif ied its business is banking on through joint ventures that veer far aﬁeld from traditional diversiﬁcation to help hedge fund structures. In many ways Asuka’s diit survive Japan’s versiﬁcation strategy is what keeps the firm af loat, as Jaunfriendly regulators, pan’s f ledgling hedge fund indifferent investors industry f inds itself in the midst of a punishing market and a punishing downturn that has reduced total industry assets by 46 market downturn. percent since the end of 2005, according to an analysis conducted by Tokyo-based fund-of-hedge funds manager Rogers Investment Advisors. “It’s almost a perfect storm of negative factors,” says the ﬁ rm’s founder and CEO, Edward Rogers. Taniya started Asuka in 2002 with two longtime M amoru Taniya was never meant for the predictable life of a Japanese salaryman. As a Tokyo University graduate with a BA in law in 1987, he stunned family and friends by turning down job offers from major Japanese corporations in favor of a seat on Salomon Brothers’ Tokyo trading desk. Twenty years later, Taniya is taking an even bigger risk: He is running a hedge fund ﬁ rm in the country widely acknowledged as the least hospitable to such investment vehicles. Taniya, 44, is co-founder and CEO of Asuka Asset Management, Japan’s second-largest hedge fund firm, which started the fourth quarter of 2007 with $1.65 billion in overall assets under management and $859.7 million in hedge fund assets. That’s not a misprint — the second-biggest hedge fund f irm in Japan has less than $1 billion in hedge fund assets. Although Japan has the world’s second-largest economy, its domestic hedge fund industry had only $8.5 billion in assets at the end of September, according to Singapore-based research ﬁ rm Eurekahedge. Even taking into account Japan-focused hedge funds based in other countries, overall hedge fund assets at work in Japan totaled only $32 billion at the end of the third quarter of 2007. Asia’s largest hedge fund company, Sparx Asset Management Co., had about $9.2 billion in Japan-focused assets at the end of October, about half of which were in hedge funds. Globally — to put these numbers in context — the world’s 100 biggest hedge fund ﬁ rms managed a combined $1 trillion when 2007 began, according to Alpha’s 2007 Hedge Fund 100. DECEMBER 2007/JANUARY 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 37

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - December 2007/January 2008

Institutional Investor's Alpha Magazine - December 2007/January 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Liberal Returns The Good Guy: Inner-city MVP Cover Story: Marathon Men Interview: Rizk Management Profile: Living on Hostile Ground Profile: Buy and Hold In Theory: The Fallacy of Portable Alpha Strategies: Changing Course Alpha Bytes: Behind the Scenes Unhedged: Commentary: An Activist Alternative

Institutional Investor's Alpha Magazine - December 2007/January 2008

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