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Monthly Archives: March 2015
According to a recently published AsiaHedge survey, total assets for the Asian hedge fund industry hit US$192.81 billion at the end of 2014, a 21% year-on-year increase. China-focused strategies are the largest strategy area in the Asian industry with US$32.88 billion in AUM, while Hong Kong is the largest centre in Asia for the management of Asian hedge fund assets with US$68 billion in AUM.
John Livingstone in Singapore has left Aberdeen Asset Management where he was most recently an investment manager in the multi-asset business. During his years with Aberdeen he has covered Asian hedge funds from both London and Singapore. Prior to joining Aberdeen in 2008 he ran an Asian FoF at Turnstone Asset Management in London. Earlier in his career he worked at OBSR, Edinburgh Fund Managers, Henderson and Russell.
Tom Royds has left Ballingal Investment Advisors in Hong Kong. Before joining Ballingal in 2011, he was COO at Brooke Capital. Earlier in his career he was at ABN AMRO, Schroders and LTCB.
Chie Furui has left her IR gig with Arcus Investment in Japan. Destination unknown. Earlier she was at Epic Partners Investments and HBK Investments. She’s also worked with Barclays and Fortis.
Kenichi Ura, Creation Japan Revaluation Fund
Kenichi Ura made himself a name while doing research and managing money at the asset management arms of Prudential and Baring. In 2007 he set up his own research shop, KU and Associates and in 2014 Creation Capital launched a new value-focused small/mid-cap Japan fund advised by Kenichi Ura. HFC’s Stefan Nilsson decided to find out more in a brief interview with Ura-san.
Can you tell us about your investment strategy?
The fund invests in Japanese companies with a low Return on Equity (ROE) that I believe have the potential to improve their ROE. Actually, in Japan low ROE stocks have historically shown better performance, along with improvement of ROE, than high ROE stocks. In addition, the fund takes short positions in companies with a high ROE that may not, in my view, be able to maintain those returns. For the long-side names, we expect a target return of each holding of more than double based on the earnings growth and the improvement of the capital structure. Companies with low ROE tend to also have low Price to Book ratios (PBR). On average I choose stocks with a PBR of less than 1.0. Accordingly, the fund’s long investments are expected to have low downside risk. In this regard, I think that there are certain opportunities for high Sharpe ratio-type of investment in Japan. For the short-side names, we decide on the investment timing based on technical analysis as well as fundamental analysis.
How is your investment strategy different from most other Japanese hedge funds?
It is long biased, contrarian and we have lower turnover. We don’t necessarily aim for a small but constant return. We rather aim for a large return with smaller risk as we invest in low PBR stocks.
As you are focused on small- and mid-cap stocks, is your research of this space mainly based on company visits?
Yes. We identify candidates for both long and short positions mainly by onsite visits with listed companies on an individual basis.
Has Abenomics had any impact on how you invest in the Japanese equities market?
Yes, it has. Abenomics requires listed companies to take the responsibilities of being listed. In other words, the listed companies with excess capital are under pressure to pay out more in dividends or make share buybacks in order to optimise the capital structure. This leaves plenty of room for share prices to go up. On the other hand, if they choose to delist from the stock exchange through an MBO or LBO due to the expectations created by Abenomics, it will also offer us opportunities to buy shares with lots of premium because the share price at an MBO or LBO historically tends to be fixed at 1.0 times PBR.
Do you see more attractive opportunities in any specific sectors in Japan?
Yes. At the moment we see attractive opportunities in areas such as electric power plants, capital expenditure and R&D.
How do you manage risk in your portfolio?
Because the long investments consist of low PBR stocks, the downside risk is somewhat limited. In addition, we apply a maximum individual stock weighting of 10%, initially 5%, and 5% for each long and short position respectively, as well as a 15% stop-loss rule for short positions. Our rules allow for 40 to 60 names on the long side and up to 30 names on the short side.
Can you tell us a bit about who you are and what you have done prior to launching your current Creation Japan Revaluation strategy?
I established my firm KU and Associates in 2007. Prior to that I spent eight years at PPM, Prudential’s asset management arm, now known as Eastspring Investments, as a fund manager. During my time there I was twice, in 2000 and 2004, ranked number one fund manager in the Japanese small stock universe by Micropal. Earlier I was at Baring Asset Management where I worked as an analyst and fund manager. I graduated from Yokohama National University’s Department of Technology, Architecture. My first job was with Wako Securities, now part of Mizuho, where I initially worked in sales and later transferred to an analyst role in the research division.
If you had not been working in fund management, what would you have been doing?
I would have been an owner of a contemporary art gallery.
Toby Bartlett has shut down his Hong Kong-based hedge fund Arena Capital Management which had a Japan focus. He and two analysts will join LIM Advisors in April. At LIM, Bartlett will launch a new Japan-focused strategy. Bartlett launched Arena in 2012 and prior to that he worked at Highbridge and Citadel. Arena was seeded by FRM.
Toshikazu Yamazaki has joined Nomura’s prime brokerage in Tokyo in a capital introduction role. He was most recently a portfolio manager for FoF manager SRF in Singapore and before that an investment manager at Sompo Japan Nipponkoa Asset Management/Zest Asset Management in Tokyo.
Bright Stream Capital Management has launched an Asia-focused macro fund trading FX and rates. The fund’s portfolio manager is Yip Ka-hay, formerly of SAC Advisors.