Institutional Investor's Alpha Magazine - December 2007/January 2008 - (Page 41)

Asuka operates three joint ventures and one discretionary management account that total $792 million. In late 2004, Asuka partnered with Monex Beans Holdings, Japan’s second-largest online broker, to found Monex Alternative Investments, which manages $250 million in funds of funds. MBH was a logical partner, as its CEO, Oki Matsumoto, and Taniya have been close friends since they started work at Salomon Brothers on the same day in 1987. Both men believe that Japanese retail investors, who have more than $13 trillion in household assets, badly need alternative investment options. Matsumoto suggested the two firms join forces: He wanted better products to offer to MBH’s online retail brokerage clients, and Asuka, which owns 49 percent of the joint venture, had the connections in the hedge fund and private equity worlds to help source them. MAI’s ﬁrst product was the Monex Capital Partners Fund, which was launched in July 2005 and now has $20 million in assets. The fund can invest in hedge funds, private equity funds, managed futures funds and real estate investment trust funds. The company’s second fund, the Fullerton-Monex Asia Fund, is jointly managed with Singapore’s Fullerton Fund Management Co., a subsidiary of giant state-owned Temasek Holdings. Also launched in 2005, the fund divides its investments between hedge funds in Japan and those in the rest of Asia, which are managed by MAI and Fullerton, respectively. It has assets of $130 million in 30 hedge funds, 14 focused on Japan and 16 on the rest of Asia. MAI’s third fund, launched in August 2006, is the Premium Hybrid 2006 fund, which invests 70 percent of its $43 million of assets in private equity funds and 30 percent in hedge funds. It is the ﬁrst such fund marketed to Japanese retail investors, who can gain access to private equity funds run by titans such as Carlyle Group and J.C. Flowers & Co. for a minimum investment of just ¥500,000. “In the rest of the world, small investors would give their right arm to buy a fund like this,” says Matsumoto. Monex Beans also distributes a fourth MAI fund, managed by Fullerton. The Fullerton China-Focused Fund was launched in August 2006 and invests in China A-shares. The long-biased fund has $60 million in assets and uses futures to hedge its exposure. MAI is considering launching additional funds in the areas of commodities futures, green technology and real estate. MAI has applied for a discretionary investment management license, which would enable it to begin marketing directly to Japanese institutional investors, especially pension funds that now invest mainly in foreign-based funds of funds. Matsumoto believes MAI’s assets have the potential to quickly reach $1 billion and that even $3 billion is a realistic target. “We think there is a huge opportunity,” he says. In spring 2005, Asuka began managing a $100 million discretionary fund for entertainment company Yoshimoto Kogyo Co., which employs the majority of Ja- pan’s comedians. Asuka followed up in 2006 by joining forces with Japanese trading giant Mitsui & Co. to form Mitsui & Co. Asuka Investments. The joint venture’s ﬂ agship offering is MA Opportunities, a multistrategy commodities hedge fund with $42 million in assets. (Asuka owns 37.5 percent of the venture.) Mitsui & Co. Asuka chief executive Shoichiro Ishibashi describes MA Opportunities as the ﬁ rst multistrategy commodities hedge fund in Japan, and its managers have set a target of $300 million in assets for 2011. The fund had a difﬁcult ﬁrst year, however, ending 2006 down 2.79 percent in a relatively strong market for commodities. It reached positive territory in 2007, with a 1.41 percent return through September. A s u k a ’s p a r t n e r i n Asuka DBJ Investment is government-owned Develop— MAMORU TANIYA, CEO, ment Bank of Japan. Asuka ASUKA ASSET MANAGEMENT DBJ Investment was founded in October 2005 with $400 million in assets under management, according to industry sources. The ﬁ rm owns a 45 percent stake in a venture with Boston-based Gordon Brothers Japan, which is the ﬁ rst company in Japan to provide inventory liquidation services for troubled and bankrupt retailers. In each of these joint ventures, Taniya says Asuka sought out businesses in which competition is at a minimal and growth potential is large. The same philosophy can be seen in his decision to enter the Japanese hedge fund industry. “It may look like we are investing in many different businesses, but the essence is the same,” says Taniya. “We try to ﬁ nd good investment opportunities in less-competitive areas.” Taniya strongly emphasizes that hedge funds remain Asuka’s core business. Despite the difﬁculties of operating in Japan and the battering taken by the country’s hedge fund industry, he is upbeat about future prospects. Taniya believes the ongoing sell-off in small- and midcap stocks has created opportunities for value investors. In 2006, Asuka closed its Long Short and Value Up funds to new investors, but depressed valuations have brought a change in strategy, and the funds are again open to investors. “We believe the Japanese market has become cheap again, so we want to raise money for everything,” Taniya says. Still, Taniya is realistic about the limitations of the alternative asset industry in Japan and realizes that the only way to ensure growth as a relatively new manager is to offer a diverse product slate. “Nobody knows when growth is coming,” he says. “When the wind does come, we want a big sail. That’s our strategy.” “We believe the Japanese market has become cheap again, so we want to raise money for everything. DECEMBER/JANUARY 2007 • INSTITUTIONAL INVESTOR’S ALPHA • 41

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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