Theoria Capital to Double Assets as Multistrategy Hedge Fund Gains 43%

Date: Thursday, October 7, 2010
Author: Netty Ismail, Bloomberg

Theoria Capital Management Pte, a Singapore-based hedge fund that trades Japanese equities, futures and options, plans to double assets in its multistrategy fund after it returned 43 percent in its first year.

The firm is seeking to grow the Theoria Multi-Strategy Fund to about $200 million within the next 12 months, said President Minoru Umezaki, a former Aizawa Securities Co. proprietary trader. The fund’s assets have already more than doubled to $115 million, from about $50 million when it was set up a year ago, the 33-year-old founder said in an interview yesterday.

The fund returned more than 26 percent through August this year, Umezaki said, compared with a 16 percent drop in Japan’s benchmark Nikkei 225 Stock Average in the period. It has gained about 43 percent since its inception in October 2009 by using a combination of strategies that allowed it to exploit pricing inefficiencies between different markets. The fund’s September returns are being reviewed by its administrator, he said.

“Under any circumstances, we continue to aim to achieve returns from mispricing, relative under/over valuation, and micro/macro events with low correlation with the market movement,” said Umezaki.

Theoria Capital is attracting investors as it outperformed the average hedge fund, which gained 1.7 percent in the first eight months of the year, according to Eurekahedge Pte.

It uses a combination of hedge-fund strategies including arbitrage, directional, equity market neutral and event driven to diversify the investment risk, allowing it to exploit pricing inefficiencies between different markets and products and trade securities affected by mergers and other corporate actions, Umezaki said.

Strong Yen

Still, Theoria Capital doesn’t expect share prices to “drop rapidly” because of low valuations and the central bank’s “continuous easy monetary policy,” he said.

The yen reached 82.77 per dollar yesterday, the strongest since May 1995. It had previously reached a 15-year peak of 82.88 yen on Sept. 15, before the central bank intervened for the first time since 2004 to help the nation’s exporters.

“In the short term, due to the potential for further fund raising by many companies including banks, and the negative impact of the yen’s appreciation, it’s a very difficult condition for the Japanese equity market,” Umezaki said.

Japanese managers suffered the biggest losses in August, with the Eurekahedge Japan Hedge Fund Index dropping 1.9 percent, according to the Singapore-based industry data provider. Japan’s stock index lost 7.5 percent that month.

Theoria Capital, which also trades listed derivatives in the U.S. and Europe, plans to expand into new markets and trade other assets in the next few years, Umezaki said.

The fund, which targets annual returns of 20 percent, has attracted capital from international funds of funds, family offices, institutional investors and high net worth individuals, he said.

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.

To contact the reporter on this story: Netty Ismail in Singapore nismail3@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net