Born anew

Thu Apr 21, 2011

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In the aftermath of the Japan disaster, a clear spirit of revival is in the air

By Aradhna Dayal

nullThe 2011 AsiaHedge Forum could not have had taken place at a more eventful moment, coming days after the disastrous Japan earthquake and the resulting tsumani that swept not just through the physical land but also the global financial markets.

Scrambling to re-confirm delegates/speakers in the wake of these events, I couldn’t help but marvel at the remarkable spirit of resilience – and indeed old-fashioned heroism and revival – that is the trademark of Asia.

Back in Hong Kong at the AsiaHedge Forum, a record number of delegates poured in, including all our Japan-focused speakers (many in the midst of temporarily relocating families and staff from Tokyo and receiving generous hosting offers from managers and investors alike in Hong Kong and Singapore). Despite an underlying sense of loss and grief for the people in Japan, a large chunk of discussions centred around the once-in-lifetime investment and rebuilding opportunities unleashed by the devastating events.

Managers and investors alike were of the view that some sterling new investment strategies could come out of the sharp plunge in the Nikkei and stocks in crippled sectors such as autos and food exports, as well as in areas such as new energy solutions and construction. And at the macro level, the calamity could present the Japanese leadership – mired for so long in controversy and inertia – with an opportunity to take concrete steps to revive the economy, and for the Japanese people to rally behind them for a change in a show of solidarity.

For a country that completely reconstructed itself after the Second World War and the Hiroshima/Nagasaki atomic bombing, this could well prove to be a new turning point and a way to emerge out of its decade-long deflation. In other words, a chance to rise from the ashes like the mythical phoenix – and be born anew.

Global investor sentiment already seems to be supporting this view. A record $2.3 billion flooded into Japan-dedicated ETFs in March alone – one of the largest inflows into the single-country ETF space in a single month. There is also anecdotal evidence of inflows into several large and long-established Japan-focused hedge funds as well, although there are also reports of outflows.

As a classic example of hedge fund resilience, several Japan-focused funds generated positive returns through the chaos in March. These included Whitney Japan Fund (5.14%), Symphony’s SPF Value Realisation (2.05%), FPP Japan Fund (5.8%), Bayview’s New Alphex (2.1%), Rockhampton (1.67%) and Yaraka (1.81%).

This is no mean feat and it would not be surprising if these managers were to attract solid new assets on the back of this performance. And let us not underestimate the importance of this: maintaining net new inflows in this segment is critical for the overall growth of the Asian hedge fund industry.

At $22.8 billion, Japan is the second largest strategy in the regional hedge fund space. As the only fully developed and deep financial market in Asia, it has long remained a must-have destination for global allocators looking at Asian exposure.

While on the subject of comebacks, two other original poster boys of the Asian hedge fund industry are starting their second innings. Michael Nock, the former founder of Hong Kong’s Doric’s Capital, has re-emerged with the Aardwolf Fund – while Steve Diggle’s hedge fund and alternative investments platform Vulpes went live at the start of April.

Both ventures are being watched with great interest within the investor community, given the founders’ long-standing experience through the various economic and market cycles in Asia, and we bring you an exclusive on both of these comebacks in this issue of AsiaHedge.

Another key issue that will require significant re-wiring of Asian funds’ compliance, capital-raising and operational efforts is the looming deadline for registration with the US SEC. We analyse the implications for Asian managers in our Regulation section this month.

Finally, we bring you complete coverage of the AsiaHedge Forum 2011, where top economists, managers, investors, regulators and legal/operations experts debated the best strategies to harness the growth of the high-octane market that is Asia.

ISSN: 2151-1845 / CDC10004H

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