Japan Hedge Fund Tops 2006 Performance
"And the trouble is, if you don't risk anything, you risk even more."
Erica Jong, b.1942, writer
The numbers are in, and the winning hedge fund for calendar year 2006 was probably John Zwanstra's US$846 million Penta Japan Fund C1 which posted a whopping 184% return through the Dec-31 period. By all accounts the pan-Asian strategy was correctly positioned effectively shorting some of the most volatile Japan stocks in the early part of the year (e.g Livedoor) and going long in small caps in Korea as well as in China when those markets were moving sharply higher. Kudos!
Zwanstraa has so much weight among PBs that at the 2006 GS "HF lovefest" he demanded and got a special room for one-on-one meetings with prospective "serious" investors. Most other managers had to tolerate the familiar casbah-market milling around of "the crowd" (i.e. window-shopper investors).
Ironically, while one Japan-named fund might have scored big, Japan funds as a group put together probably the worst performance in a long, long while. What follows is a brief overview culled from the reports of a well-known Geneva-based private bank.
The universe consists of 34 funds with combined assets of US$14.6 billion classified broadly as "diversified equity Japan" (long/short equity, activist/event driven & equity market neutral). The average fund size was close to US$430 million.
The top performer was +184% with the worst performer -27.75%. 65% of the observed funds posted negative returns; 32% posted returns in excess -10%, while 9% posted returns in excess of -20%. The combined assets of the "losers" topped US$8.7 billion meaning that 60% of those assets experienced some kind of capital "destruction" over the period (excl. other asset raising).
On an equal weighted basis, the 34 Japan hedge funds posted average returns of 0.78%. If you take out the obvious positive outlier this number becomes an average performance (net of fees) of -4.80%.
What about Asia hedge funds? That is, hedge funds whose investment strategy may/may not trade Japan as part of its geographical mandate. Many of these funds tend to spread investments across countries that may/may not include Australia or New Zealand. They may also be focused on individual countries such as China.
In the universe there are 21 funds broadly defined as "diversified equity Asia" representing long/short equity, activist/event driven, equity market neutral strategies with combined assets of US$7.73 billion. The average fund size is US$368 million.
The top performer was +32.77% with the worst at -9.73%. Only 14% of funds posted negative returns. The average negative return was -4.10%. 62% of funds posted positive returns in excess of 10% while 19% of the funds posted postive returns in excess of 20%.
On an equal weighted basis, the 21 Asia hedge funds posted returns of 12.90%.
So, based on this limited universe comparison alone it paid for investors an average of between 12.12% to 17.70% in performance return to have been in Asia avoiding Japan exposure. Presumably, the better Asia FoHF firms might have taken advantage of this performance disparity with effective tactical asset allocation during 2006. But then again, judging from the results maybe they didn't. Perhaps that is one reason larger institutional investors are now starting to look for single managers in Asia rather than going the Asian FoHF route. Mahalo.
"And the trouble is, if you don't risk anything, you risk even more."
Erica Jong, b.1942, writer
The numbers are in, and the winning hedge fund for calendar year 2006 was probably John Zwanstra's US$846 million Penta Japan Fund C1 which posted a whopping 184% return through the Dec-31 period. By all accounts the pan-Asian strategy was correctly positioned effectively shorting some of the most volatile Japan stocks in the early part of the year (e.g Livedoor) and going long in small caps in Korea as well as in China when those markets were moving sharply higher. Kudos!
Zwanstraa has so much weight among PBs that at the 2006 GS "HF lovefest" he demanded and got a special room for one-on-one meetings with prospective "serious" investors. Most other managers had to tolerate the familiar casbah-market milling around of "the crowd" (i.e. window-shopper investors).
Ironically, while one Japan-named fund might have scored big, Japan funds as a group put together probably the worst performance in a long, long while. What follows is a brief overview culled from the reports of a well-known Geneva-based private bank.
The universe consists of 34 funds with combined assets of US$14.6 billion classified broadly as "diversified equity Japan" (long/short equity, activist/event driven & equity market neutral). The average fund size was close to US$430 million.
The top performer was +184% with the worst performer -27.75%. 65% of the observed funds posted negative returns; 32% posted returns in excess -10%, while 9% posted returns in excess of -20%. The combined assets of the "losers" topped US$8.7 billion meaning that 60% of those assets experienced some kind of capital "destruction" over the period (excl. other asset raising).
On an equal weighted basis, the 34 Japan hedge funds posted average returns of 0.78%. If you take out the obvious positive outlier this number becomes an average performance (net of fees) of -4.80%.
What about Asia hedge funds? That is, hedge funds whose investment strategy may/may not trade Japan as part of its geographical mandate. Many of these funds tend to spread investments across countries that may/may not include Australia or New Zealand. They may also be focused on individual countries such as China.
In the universe there are 21 funds broadly defined as "diversified equity Asia" representing long/short equity, activist/event driven, equity market neutral strategies with combined assets of US$7.73 billion. The average fund size is US$368 million.
The top performer was +32.77% with the worst at -9.73%. Only 14% of funds posted negative returns. The average negative return was -4.10%. 62% of funds posted positive returns in excess of 10% while 19% of the funds posted postive returns in excess of 20%.
On an equal weighted basis, the 21 Asia hedge funds posted returns of 12.90%.
So, based on this limited universe comparison alone it paid for investors an average of between 12.12% to 17.70% in performance return to have been in Asia avoiding Japan exposure. Presumably, the better Asia FoHF firms might have taken advantage of this performance disparity with effective tactical asset allocation during 2006. But then again, judging from the results maybe they didn't. Perhaps that is one reason larger institutional investors are now starting to look for single managers in Asia rather than going the Asian FoHF route. Mahalo.
posted by Franklin Scruggins | 6:34 AM
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