Fri, Jul 25, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Asia Pacific Intelligence

FCA seeds Japanese -focused hedge fund

Thursday, February 07, 2013

Patric de Gentile Williams

Continuing with the new focus on hedge funds in Japan, news came at the end of January that FRM Capital Advisors (FCA), the seeding division of FRM, Man Group plc's fund of hedge fund division, had invested in Arena Capital Management, a Japan focused hedge fund, run by ex-Citadel and Highbridge manager, Toby Bartlett.

In an interview with Asia Pacific Intelligence, Patric de Gentile Williams, head of seeding at FRM explained that they had been open minded generally about strategies in which they would next make an investment, but that Japan had recently increasingly come to the forefront of their investment thoughts.

"There has been a sense over the last few years that globally investors were reducing their exposure to Japanese long short as liquidity eroded over the last couple of decades and the market was reasonably moribund" de Gentile Williams says.

"But we did notice some investors starting to ask questions about it maybe a year ago so that exodus was coming to an end." Three factors portentously collided to push FCA into its investment with Arena.

"One, there is a fantastic opportunity at Arena, secondly there was some sense that this outflow was coming to its end and a few people were tempted to look into the space, and thirdly was the fact that the yen has fallen, then the Nikkei was up so the turnover in the equity market has suddenly gone up which has drawn people's attention to that space. We were most of the way towards making our decision to invest in Arena before the market turned, but it didn't hurt."

Arena's Bartlett is a Japanese speaking Australian, who spent three years living in Japan and worked for Fidelity, then Citadel and then Highbridge. "We liked a number of things about him" de Gentile Williams says. "He is a charismatic, enthusiastic, driven character and quite compelling as an individual. He has also been focusing on the same sector, of Japanese domestic securities, for 10 years now so he has good relationships in that sector. In an area where most have been withdrawing resources, he has 350 to 400 stocks that he knows very well. That set of relationships and long experience give him a good backdrop against which to run money. He has developed a distinctive style and strong skill set in the way he trades and portfolio construction which allows him to get clear expressions of the ideas he wants while neutralising risks."

Arena launched mid-2012 and launched the Japanese long short equity strategy fund in September. De Gentile Williams describes the fund as market neutral with pure alpha returns. FCA is starting its investment with $25m and is the first institutional investor into the fund. "For us it's a relatively small investment which is not a reflection of any lack of conviction on our part more that it's a niche opportunity. At the moment total capacity is probably around $500m." This may increase as the Japanese stockmarket liquidity improves.

Since September, the fund has seen a small positive return of just over 2% but according to the pro forma track record Bartlett has consistently achieved high single digit returns with a Sharpe ratio of over one.

For FCA, this deal is the first of three with another one coming out in each of the next two quarters.

 
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
Asia Pacific Intelligence
Asia Pacific Intelligence
Asia Pacific Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Events – AIMA Australian Hedge Fund Forum, Sept. 16, Sydney[more]

    AIMA Australia invite you to join us at our annual Hedge Fund Forum on Tuesday 16th September 2014 at the Sofitel Sydney Wentworth. The AIMA Australian Hedge Fund Forum is a non-profit hedge fund conference organised by the industry for the industry, featuring quality Australian and internation

  2. Opalesque Roundtable: Success in hedge fund marketing not linked to performance, but investor appetite[more]

    Komfie Manalo, Opalesque Asia: Success in marketing a fund is not linked to the performance, but to investor appetite, to the way you can market the fund, and to how much time you can spend to raise assets, said Antoine Rolland, the CEO of incubator and seeding firm

  3. Opalesque Exclusive: Loeb, Grantham cite growing economic concerns in letters[more]

    Bailey McCann, Opalesque New York: Hedge fund manager Daniel Loeb, head of Third Point, and Jeremy Grantham of Grantham, Mayo, Van Otterloo & Co. have both released their quarterly investor letters today. While news is positive on some fronts, and both men see pockets of opportunity, they also h

  4. Investing – Hedge funds expect Netflix earnings to catapult forward, Third Point's Loeb takes stakes in Fibra Uno, YPF, Royal DSM, Lake Capital in talks to back Engine Group[more]

    Hedge funds expect Netflix earnings to catapult forward From Investing.com: Netflix has made major strides forward in 2014 despite ongoing battles with the FCC and cable companies over the issue of net neutrality. The FCC has now received over 500,000 comments from the public on its pend

  5. Hedge fund manager Winton Capital making headway with long-only strategy[more]

    From PIonline.com: North American investors are helping Winton Capital Management Ltd. make progress — albeit slowly — toward its founder's goal of becoming a $100 billion company. The firm's ticket to quadrupling its assets under management is unlikely to be one of its scientifically designed manag