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Japan hedge funds see increased interest: Triple A

Date: Tuesday, March 2, 2010
Author: Reuters

Japanese hedge funds are catching the eye of foreign investors who have shunned the region for years now, according to a top executive with Triple A Partners, a Hong Kong-based hedge fund seeding and distribution company.

"While some investors don't want to touch Japan after past disappointments, we've had a lot more investors saying this is the year of Japan," Roger Pyrke, deputy chief executive at Asia Alternative Asset Partners, also known as Triple A Partners, told the Reuters Private Equity and Hedge Funds Summit.

Triple A recently signed on Asia's largest hedge fund manager - Japan-based Sparx Asset Management - to market and distribute the latter's products outside the country.

"Many institutions are massively underweight Japan and think its time to get up to neutral weighting on the country," Pyrke told the Summit, held in Hong Kong.

Japanese hedge funds have seen slightly positive asset flows so far this year, compared with outflows from the rest of Asia.

Pyrke said investors had taken a liking to funds invested in mid-cap and small-cap companies in Japan.

Sparx's Japan Small Cap Rising fund rose 26.8 percent in 2009 and is up 6 percent so far this year, according to data on Lipper, outperforming last year's 10.6 percent gain and the 1.9 percent growth year-to-date on the Lipper Global Equity Japan Small & Mid Cap Index.

While inflows into Asia picked up pace in the second half of 2009, following a period of massive redemptions, the flows have been sticking close to large established funds, said Pyrke.

Smaller funds and start-ups are still fighting to raise capital despite being run by managers with solid pedigrees.

"The sweet spot for Asian investment is a $50 million-$100 million fund, which are a lot more nimble than a $1 billion fund. But institutions are steering clear of these and seeking safety in numbers," said Pyrke.

"Its a good time for us to be making deals, the terms are much better than they were two years ago," he said.