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Opalesque Exclusive: Ferox launches Japan convertible fund with $100m, to offer play on future recovery of Japanese equity market Benedicte Gravrand, Geneva: According to a communication sent to Opalesque, London-based Ferox Capital Management is launching this month a new Japan convertible fund that offers investors a play on a future recovery of the Japanese equity market. The fund will be managed by Jeremy Herrmann’s team, which also manages Ferox’ other funds.

The strategy of the new fund is to isolate the embedded call options in convertible bonds and remove any credit exposure through use of asset swaps. The Fund will offer investors a long-term play on any sharp rise in Japanese equities, while at the same time limiting investors’ downside. The expectation is that the low price of the options will limit draw-downs and so make it easier for investors to remain committed to the Fund over the cycle. The Fund will be long volatility. Current climate in Japan allows Ferox to execute credit hedges to extract the embedded call option in the convertible. Investors are underweight in Japan and equities are trading on historically low multiples.

Ferox has longstanding and successful experience of trading Japan, which has been an important element in its other funds. The Japan Fund is the latest addition to the Ferox stable. The main global convertible strategy fund, which launched in July 2000, has returned an ......................

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