Japan's Zombie Hedge Funds
"On the plus side, death is one of the few things that can be done just as easily lying down."
Woody Allen
Film Actor & Director (1935 - )
Like a bout of the Avian Flu, more and more Japanese specialist hedge funds (many of them long/short equity) appear to be in a death spiral. Not many years ago there were over 200 hedge funds in New York, London, Singapore, Hong Kong, S.A.R. and Sydney commanding combined assets in the range of US$20-25 billion focusing almost exclusively on the Land of the Rising Sun. Today, that number of funds is closer to 80-100 and the AUM managed is closer to US$7-9 BLN. Yikes!
"Zombie hedge funds", in this case are Japanese specific funds/firms which have undergone a steady and swift loss of AUM: initially from foreign FoHF investors, U.S. and Canadian pension plans and are now "hanging on" for dear life with a few million here and there from local Japanese investors; and that lifeline is soon to end.
Many prime brokers already have their own list of zombie managers and are not likely to steer some of their well-heeled investors in their direction and for obvious reasons.
Sad to say, many investors have abandoned the steady stream of double digit losses and have been fed up with the usual excuses - unexpected volatility, lack of liquidity, poor sentiment, program selling by institutions, lack of IPO activity, economic recession (or the best one yet), the Nikkei 225 is down so we can't produce any alpha!
In fairness, even Asia's "best" hedge fund producer, John Zwanstraa, has had a tough June and July in terms of performance. And one worry might be that Japan's zombie hedge fund phenom might spread to other locations (like China). So far, that hasn't really happened even though emerging markets have certainly moved down the global investor priority list although the Beijing Olympics might prompt a fresh inflow of investor interest in the short run.
But, based upon the performance number through July from hedge funds covered by HSBC Private Bank, the following are candidates for this author's Zombie hedge fund status given their negative YTD return and low AUM figures: Blue Sky (Michael Hill); GAM Equity Hedge Fund (Lesley Kaye); Henderson Japan Abs Return Fund (William Garnett & Jeremy Hall); Melchoir Japan (Ken Nishizawa); Myojo Japan Long Short Fund (Makoto Kikuchi); Odey Japan & General Inc. US$ (Alex Griffith); Platinum Japan Fund (Kerr Nelson); WF Japan Fund Ltd A/1 (Peter Ferry).
Each of these funds and possibly up to an additional 10-15 more are what I would call "zombie hedge funds" - unproductive and unloved by the global investment community with the clock definitely ticking in terms of being a long term viable business.
As we head into the second half of the 2008 calendar year a few of these may very well shut down for good, ending a sad chapter in hedge fund development in Japan and Asia. Mahalo.
"On the plus side, death is one of the few things that can be done just as easily lying down."
Woody Allen
Film Actor & Director (1935 - )
Like a bout of the Avian Flu, more and more Japanese specialist hedge funds (many of them long/short equity) appear to be in a death spiral. Not many years ago there were over 200 hedge funds in New York, London, Singapore, Hong Kong, S.A.R. and Sydney commanding combined assets in the range of US$20-25 billion focusing almost exclusively on the Land of the Rising Sun. Today, that number of funds is closer to 80-100 and the AUM managed is closer to US$7-9 BLN. Yikes!
"Zombie hedge funds", in this case are Japanese specific funds/firms which have undergone a steady and swift loss of AUM: initially from foreign FoHF investors, U.S. and Canadian pension plans and are now "hanging on" for dear life with a few million here and there from local Japanese investors; and that lifeline is soon to end.
Many prime brokers already have their own list of zombie managers and are not likely to steer some of their well-heeled investors in their direction and for obvious reasons.
Sad to say, many investors have abandoned the steady stream of double digit losses and have been fed up with the usual excuses - unexpected volatility, lack of liquidity, poor sentiment, program selling by institutions, lack of IPO activity, economic recession (or the best one yet), the Nikkei 225 is down so we can't produce any alpha!
In fairness, even Asia's "best" hedge fund producer, John Zwanstraa, has had a tough June and July in terms of performance. And one worry might be that Japan's zombie hedge fund phenom might spread to other locations (like China). So far, that hasn't really happened even though emerging markets have certainly moved down the global investor priority list although the Beijing Olympics might prompt a fresh inflow of investor interest in the short run.
But, based upon the performance number through July from hedge funds covered by HSBC Private Bank, the following are candidates for this author's Zombie hedge fund status given their negative YTD return and low AUM figures: Blue Sky (Michael Hill); GAM Equity Hedge Fund (Lesley Kaye); Henderson Japan Abs Return Fund (William Garnett & Jeremy Hall); Melchoir Japan (Ken Nishizawa); Myojo Japan Long Short Fund (Makoto Kikuchi); Odey Japan & General Inc. US$ (Alex Griffith); Platinum Japan Fund (Kerr Nelson); WF Japan Fund Ltd A/1 (Peter Ferry).
Each of these funds and possibly up to an additional 10-15 more are what I would call "zombie hedge funds" - unproductive and unloved by the global investment community with the clock definitely ticking in terms of being a long term viable business.
As we head into the second half of the 2008 calendar year a few of these may very well shut down for good, ending a sad chapter in hedge fund development in Japan and Asia. Mahalo.
posted by Franklin Scruggins | 7:58 AM
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