Hedge fund liquidates all exposure to Japan

Asia-focused hedge fund Central Asset Investments has cut its entire exposure to Japan, including stakes in blue-chip companies such as Canon and Toyota Motor Corp.

Chief executive Eddie Tam, whose CAI Global Fund rose 48 per cent last year to become one of the Top 10 multi-strategy hedge funds tracked by Lipper in the world, said about 15 per cent of his portfolio was in Japan before the earthquake.

He did not disclose his exact assets but said the fund was approaching $250 million, up from $70 million at the end of 2009.

"When the crisis hit, we reacted quite quickly. So within two to three days, we liquidated the entire Japanese exposure," said the Hong Kongbased Tam.

"It is not really prudent to guess the outcome of the nuclear incident at this point in time," he said, adding that he had no immediate plans to move back.

"I am not in the camp who thinks that this will blow over very quickly," he said.

"I think, first of all, they cannot afford the reconstruction easily because of the already very stretched fiscal condition."

Tam said that to finance the reconstruction of the vast part of northeast Japan, it was possible that Japanese insurance firms might liquidate their portfolios.

The disaster could even make Japan go ahead with reforms, including to its immigration and mergers and acquisitions policies, he said, but any such reform would not be an immediate priority.

"Frankly, boosting dividends, enhancing [return on equity], all those things which actually may entail cost-cutting and not further investments, I do not think those are the priorities of the country," he added.

Tam, born in Hong Kong and raised in Canada, said his fund's net asset value was down about four per cent since the quake hit, with about half of the losses directly from exposure to Japan.

He said that, although valuations looked far cheaper on a price-tobook perspective, the evolving nuclear situation and the ability of Japan to finance reconstruction were major concerns.

"I profess ignorance. I do not know how bad it is," said Tam, whose brother was a nuclear safety engineer. "I do not know if they are telling all the truth promptly."