Takayuki Asakawa’s new hedge fund offers both Japanese and foreign investors the opportunity to engage in a long-short strategy with Japanese stocks. Here are four reasons why they keep an eye on how it’s doing.
1. Asakawa has done it before.
The former Deutsche Bank analyst, who struck out on his own to launch Tokyo-based Zone Investments Inc. three years ago, has already used the strategy successfully.
The firm’s inaugural hedge fund, focused naturally enough on Japan, was open only to a small pool of investors and managed approximately $5 million. Since its inception in July of 2011, it hit pay dirt. A letter to investors said that that first fund returned an impressive 49.6% since its inception in July of 2011. That topped the Eurekahedge Japan Hedge Fund Index, which over the same period returned 29%.
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Now Asakawa is confident he can do it again. Asakawa and Naoyuki Takahashi, a partner and the CIO of Zone Investments, run the Tidal Fund, his newest effort, together. The Tidal Fund uses a long-short strategy on a range of 100–150 Japanese stocks. It was launched with 600 million yen ($6 million), and a target of 5 billion yen within a year and 20 billion within three. Asakawa also hopes for a 20% return per year.
2. Asian hedge funds are still hot.
Tidal’s targets could certainly be met, despite the fact that things looked a bit cheerier in the fourth quarter of 2013 than in the first quarter of 2014. According to a report from Hedge Fund Research, “The strong inflows into Asian hedge funds that began towards the end of 2013 continued into the first quarter of 2014, driving total capital invested in the Asian hedge fund industry to a second consecutive quarterly record.”
However, Japanese focused hedge funds recorded a decline for the quarter, with the HFRX Japan Index falling -1.6% as the yen strengthened and the Nikkei 225 declined ever more sharply. In 2013, Japan led all hedge funds globally with a gain of +32.8% and attracted a record $4.5 billion of annual inflows; investors redeemed $1.4 billion from Japanese hedge funds in the first quarter of 2014, according to the research.
“As the global M&A boom accelerates with new cross-border transactions and activist inversion trades, the number of Asian hedge funds employing Event Driven and Macro strategies has increased in the last year, with these including not only Currency & Commodity, but Activist, Distressed, Quant/CTA and High Frequency Trading strategies,” said Kenneth J. Heinz, president of HFR, said in the HFR Asian Hedge Fund Industry Report.