Ex-Goldman Trader Maruyama Targets $114 Million for New Japan Hedge Fund

Tan Maruyama, a former proprietary trader at Goldman Sachs Group Inc., aims to boost assets of his new Japan-focused hedge fund that bets on securities ranging from equities to convertible bonds to about $114 million.

The R-SQUARED Master Fund, a multi-strategy hedge fund, began on April 1 with 1.36 billion yen ($16 million) of capital and has returned 0.7 percent through June on a preliminary basis, said Maruyama, the founder of Round Rock Capital Advisors Co., a Tokyo-based hedge-fund advisory firm. The fund aims to increase assets to 10 billion yen within 12 months and to about 30 billion yen in a year-and-a-half, he said.

Maruyama, 39, joins a new breed of Japanese hedge funds introducing a wider range of strategies in a country formerly dominated by long-short funds that bet on rising and falling stock prices. His fund combines three main strategies: equity long-short, credit and arbitrage trading of convertible bonds.

“There isn’t that much competition in Japan, even with the market size we have, which gives us an edge with the sort of background we have” Maruyama, who headed the convertible bond trading desk at Goldman Sachs, said in an interview in Tokyo on July 2. “Investors also told us the Japanese hedge-fund space has been dominated with long-short funds and they were becoming interested in other strategies, which prompted us to enter.”

Eurekahedge’s index tracking Japan-focused, multi-strategy funds includes seven members, compared with more than 250 globally and more than 40 for Asia.

Assets Growing

The R-SQUARED Master Fund’s gain in the first three month since its start contrasts with a 1.6 percent decline by the Eurekahedge Japan Hedge Fund Index in the same period.

The fund’s assets have grown to 1.6 billion yen through new allocations from high-net-worth individuals, Maruyama said. Prior to the start, the fund returned 5.2 percent from Jan. 22 through March 31, based on a paper portfolio employing simulated strategies, said Maruyama, who also headed the credit sales and trading team at Merrill Lynch Japan Securities Ltd.

The fund’s return was trimmed because of losses it took amid market turmoil in May triggered by European sovereign debt concerns, he said, adding that Japan’s credit market remains attractive.

Maruyama runs the fund with Takatoshi Itoshima, former hedge-fund manager at U.K.-based Capula Investment Management LLP’s Tokyo office; Satoshi Kamata, who also joined from Capula Investment in Tokyo; and Shuhei Komatsu, who was also formerly at Merrill Lynch.

Talent ‘Injection’

Hedge funds being set up by proprietary traders are attracting investors because of their ability to control risks and experience in managing large amounts of funds at their former employees, usually major financial institutions, prime brokers including Futoshi Ago at Bank of America Corp. say.

“The Japanese hedge fund space needs an injection of new talent and strategies other than equity long-short in order to focus global investor attention back on the entire universe of managers there,” said Kirby Daley, a senior strategist in Hong Kong with Newedge Group’s prime brokerage business.

Among the Japan-focused funds starting this year are Alithion Japan Fund, set up by former Mizuho Securities Co. proprietary traders, and the Orix Commodities Fund, headed by Orix Investment Corp.’s chief trader.

Maruyama’s Cayman Island-based fund has maximum capacity of 50 billion yen and is managed by MAM Pte in Singapore.

Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets, bet on falling as well as rising asset prices, and participate substantially in profits from money invested.

To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net; Komaki Ito in Tokyo at kito@bloomberg.net