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September 27, 2006
U.S. funds of funds attracting more Japanese money
U.S. funds of funds, which invest in select hedge funds, are increasingly attracting money from Japanese institutional investors in search of high-yielding financial vehicles.
The Japanese investors are increasingly showing their preference for such funds over direct investments in hedge funds, because of the difficulty of assessing the investing abilities of specific hedge funds, industry officials here say.
In an interview with Jiji Press, Geoffrey Stern, president of Muirfield Capital Management LLC, a New York-based fund of funds, expressed hopes of attracting money from a wide range of Japanese institutions.
"We focus on pension funds, (and) insurance companies are important market for us," Stern said, adding that he expects to see entrustment from regional banks in Japan.
A recent U.S. research report found that Japanese institutional investors invested 994 billion yen in hedge funds in 2005, a 13-fold jump from 77 billion yen in 2001. This year, the amount is expected to exceed one trillion yen.
The proportion of the Japanese institutions that invested directly in hedge funds stood at 63 percent in 2005, down from 85 percent in 2003. Meanwhile, the proportion of those that used funds of funds increased to 84 percent from 70 percent.
Explaining the increased popularity of funds of funds, Stern said Japanese institutions acknowledge the need "to hire experts like us to identify which fund to invest and to manage the investments."
He also said his firm's "big advantage" is its relationships with other hedge fund managers and Wall Street players, which allow the firm to determine how talented they are.
In the United States, a midsize hedge fund recently incurred a heavy loss due to a fall in the natural gas market.
On this, Stern said a classic hedge fund adopts "a conservative investment style" and "it is unlikely" a very large hedge fund would suffer losses like those incurred by Long-Term Capital Management, which collapsed in 1998 and caused disruption to international financial markets.
-Mainichi-
Posted by su at September 27, 2006 10:18 AM