Institutional Investor's Alpha Magazine - December 2007/January 2008 - (Page 39)

boutique money management business in Japan.” It can take years for an aspiring entrepreneur to obtain the discretionary fund management license required to sell products directly to Japanese investors. “It’s very hard to be authorized,” says Tetsuya Abe, head of compliance at investment management ﬁ rm Epic Partners Investments Co. “There are many strict regulations.” Epic received its discretionary license in May 2006 after an eight-month application process. Abe says not a single asset management ﬁ rm was awarded a license in the three years before his ﬁ rm’s success, and he knows of at least ten applicants still stuck in the queue. Abe offers an alternate, simpler, explanation for why Japan has failed to develop a vibrant hedge fund community: Few Japanese professionals have any desire to strike out on their own. “Most Japanese want to be salarymen,” he says. Taniya and his colleagues are not like most Japanese. The ﬁrm they launched now employs 27 professionals, including ten fund managers, and runs three of Japan’s most established hedge funds: the $210 million Asuka Japanese Equity Long Short Fund, the $312 million multistrategy Asuka Opportunities Fund and the $337 million Value Up Fund. (All asset ﬁgures are as of September 2007.) Although the three hedge funds have outperformed their benchmarks since inception, the hard realities of the Japanese market have caught up with Asuka. MAKOTO ISHIDA Like the rest of the Japanese hedge fund industry, the f irm has taken body blows from a dramatic downturn that began about 18 months ago. Asuka’s hedge fund assets under management declined more than 25 percent in the first nine months of 2007 from a high of $1.2 billion at the end of 2006, despite relatively strong performance. A broad retreat by Japanese investors is being driven by concerns about the near-term market direction — the benchmark Topix index was down more than 8 percent for the ﬁ rst 11 months of 2007. Rather than waiting to see whether the Japanese market would hold up, many investors shifted funds to faster-growing countries like China, where the benchmark CSI 300 index was up more than 137 percent for the year through November. As part of the contraction, domestic hedge fund assets in Japan declined to the $8.5 billion at the end of September from $11 billion when 2007 began, according to Eureka hedge. Japan-focused hedge fund assets around the world plummeted, from $65 billion at the end of 2005 to less than $35 billion, says Rogers. “It was nothing short of a catastrophe for managers,” he adds. Eurekahedge notes that at least 31 of the roughly 250 Japan-focused hedge funds operating around the world were forced to close in 2006, and more hit the wall in 2007. Many funds were blindsided in 2006 by the meltdown in Japan’s small- and midcap equity sector. This Monex Beans Holdings CEO Oki Matsumoto has partnered with Asuka to provide funds of funds for retail investors. DECEMBER 2007/JANUARY 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 39

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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