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Rogers I.A. gets $90m mandate from Japan institution, as Japan's pension funds become promising asset-raising target

Monday, July 05, 2010
Opalesque Industry Update – Rogers Investment Advisors announced in a letter received by Opalesque today, that advisory AuM, through its relationship with Wolver Hill Asset Management and Wolver Hill Advisors, will increase by approximately $90m on August 1st, bringing total firm assets under advisory to $130m. The $90m will be applied solely to dedicated Japan-only FoHFs investments, said the Tokyo-based hedge fund firm in a press release.

The $90m is a mandate from a Japanese foreign investment trust distributed by one of the largest Japanese financial institutions and is part of a closed-end fund ending in 2013, according to Bloomberg.

“This is a sign of on-going alpha opportunities in the Japanese hedge-fund space and a result of four years of hard work in building out our business,” said Ed Rogers, CIO of Rogers Investment Advisors. “We hope and expect to win more of these mandates going forward.”

Ed Rogers said at the end of last December that he saw a much brighter year for Japan and that the Euro was unsustainable (see Opalesque Exclusive here).

Wolver Hill Japan fund
The Wolver Hill Japan Multi-Strategy Fund is approximately +3.2% net of fees YTD through June, 2010 vs. Japan’s TOPIX index returns of -7.3% and S&P 500 -7.6%.

Comparatively, the Eurekahedge Japan Hedge Fund Index was down 0.58% (est.) in June and up 2.77% YTD. The index’s best months were March and April (3%+ each month).

Wolver Hill Japan has net returns of +17% since inception of Nov. 2006, vs. TOPIX returns of -46% and S&P 500 -21% over the same period.

In their latest fund commentary on 25 June, Wolver Hill Asset Management and Rogers Investment Advisors said that although Japanese stock markets started strongly thanks to the announcement by the People’s Bank of China to allow increased flexibility of the yuan/USD exchange rate, they closed weaker than the previous week due to concerns over the slowdown of the US economy following much weaker than expected home sales (both existing and new), and a stronger JPY.

Some of their underlying managers took a cautious stance by reducing gross/net positions. One manager hedged his portfolio by purchasing put options which cover several major indices.

Japan’s institutions increasing investments in alternatives
For hedge funds, Japan's institutional investors are a promising asset-raising target looming on the horizon, said US-based marketing firm FletcherBennet in March, an opinion which was mirrored by Blackstone's Stephen Schwarzmann (see Opalesque Exclusive here).

In the Opalesque Japan Roundtable in March 2010 (Source), we learned from the managers based in that country that it is indeed the case that hedge funds will find opportunities with this investor base. Some of the largest institutional investors in Japan are in the position where they have a real need to chase higher performance, and are expected to do so by increasing their market exposures through alternatives vehicles, including hedge funds.

"Quite simply, Japanese pension funds will not produce enough returns to meet their future liabilities with their current asset mix. This will indicate that they will have to make greater allocations to alternatives in the near future," said Rory Kennedy, COO for Rogers Investment Advisors during the roundtable.

Rodgers / Wolver Hill’s funds of hedge funds may have a mandate from a Japanese instition, but Japanese pensions are reportedly choosing to invest in single manager hedge funds over FoHFs these days: pension funds that plan to put money with single hedge fund managers toppled those that said they’d choose managers who invest clients’ cash in an array of hedge funds for the first time since 2005, a Daiwa Institute of Research report said in December. The majority will go to individual managers who beat benchmarks, not to FoHFs caught up in the industry’s poor returns. – Gravrand.


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