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Japan Hedge Fund Funnex Plans Asian Expansion With New Chinese President

Date: Friday, June 25, 2010
Author: Bloomberg

Funnex Asset Management Co., a Japanese hedge fund with about $2 billion in assets, plans to expand into Asia and has replaced its founding president with a Chinese native to further that transition.

Xiao Minjie, a former senior economist at Daiwa Institute of Research based in Shanghai and Hong Kong, became president of the Tokyo-based firm on June 16, taking over from the founder Masaru Nishizawa, who became chairman and remains as chief investment officer, according to the executives. Funnex plans to appoint a Chinese native as a board member as early as August as part of its effort to branch into China’s market, Nishizawa said.

“The biggest opportunities and changes are taking place in Asia, especially China, and how we position ourselves to leverage that big chance will be the key to survival,” Nishizawa, 60, said in an interview in Tokyo yesterday. “In doing so, it makes very little sense for a Japanese like me, who speaks not a word of Chinese, to be heading the firm.”

The changes mark a departure from Funnex’s traditional focus on Japanese equities since Nishizawa founded the firm in 2000, after its assets under management shrunk to about a third from its peak in January 2006. Funnex currently offers more than a dozen funds which all focus on the Japanese market, including the 15 billion yen ($167 million) Nikko Evolution fund.

Alliances Possible

Funnex aims to begin offering funds that will invest in Asian markets beyond Japan within two to three years, Xiao said, declining to elaborate on the details. An alliance with a Chinese firm is also a possibility, he said.

“We want the Asian investors to better understand Japan and by doing so, we want to capture their assets,” Xiao, 45, said.

Japanese clients account for about half of Funnex’s current assets, while the rest are mostly in Europe, according to the firm.

Japan’s economy will probably grow 2.6 percent for the year through March 2011, according to the government, after a 5.2 percent drop in calendar year 2009, the biggest decline since comparable data were made available in 1955.

The fiscal 2010 target is less than a third of the 8 percent expansion forecast for China, which is set to overtake Japan as the world’s second-biggest economy this year.

“In five to 10 years, it will become a norm for foreigners to be heading Japanese firms,” Nishizawa said. “Those who can adjust to the changing landscape will be able to survive and we want to be the first in taking a lead in making those shifts.”

Nishizawa started his career as an analyst at Nikko Securities Co. in 1974 after graduating from Waseda University with a bachelor’s degree in commercial science. From 1986 to 1999, he managed Japanese equity funds for Warburg Investment Management in Tokyo, later to become Merrill Lynch Investment Management Co.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.