After losing a lot (some estimated up to $2bn) as a result of Japan’s March 11 earthquake and tsunami, and giving a bit ($1m) to Japan’s relief effort, Man Group is recouping some losses and is back in serious business in Japan – and wants everybody to know about it.
The timing seems good. Man’s move comes as Japan’s stock market on Monday reached its highest level since the March 11 disasters, after plunging more than 16 per cent in the first two trading days after the earthquake.
On Monday this week, before closing until Friday for the annual “Golden Week” string of holidays, the Nikkei 225 Index ended up 1.6 per cent to 10,004.20 – drawing (metaphorical) cheers from investors and numerous fund managers who appear to have been taking a fresh look at Japan in recent weeks.
Despite moves by ratings agencies to downgrade or lower their outlook for Japan, interest among overseas investors had been steadily growing in the months before the March 11 disasters. In their aftermath, fund managers showed new interest in buying into Japan.
Man said on Tuesday it had raised $1.5bn in Japan for its largest post-financial crisis fund, suggesting, as the FT reported, that the country’s investors are seeking to diversify their holdings in the wake of the devastating March 11 disasters.
The size of the fund – about three times larger than analysts had expected – is being seen as both a vote of confidence in Japan, and in Man’s strategy, following large outflows prompted by the global financial crisis.
Accordingly, the hedge fund group was one of the biggest gainers in the FTSE100 on Tuesday, increasing 3.3 per cent or 8.3p, to close at 258p.
As the FT explains:
The new vehicle is a feeder into Man’s flagship AHL fund, a computer-driven global strategy that follows trends and invests in a broad range of asset classes. It aims to be uncorrelated to equities and bonds and is therefore seen as a diversifier of risk.
Following the March earthquake and tsunami, Japanese stocks have suffered from increased volatility as investors withdrew money from local markets. The success of Man’s launch is an indication that Japanese investors may have become increasingly risk adverse since the disaster.
We’re not sure what Japanese investors are thinking about risk, which in a broader sense seems to be ever-present in post-quake daily life in Tokyo.
But as we noted in March as well as more recently, Japan has drawn a range of long and short investment interest ranging from large hedge funds to ETFs and others.
As the WSJ notes:
Some fund managers see the earthquake as the turning point for international investors. They say manager sentiment, money flows, Japan’s long-term economic outlook and its reasonable stock valuations all suggest that the market’s rapid rebound could mark the beginning of Japan’s re-emergence as a top destination for international funds.
Reuters takes Man’s move a step further, pronouncing that the Japan fund could signal the “start of a new alternatives investment boom”.
Part of the strong launch by Man of the new fund is thanks to its partnership with Nomura, the market leader in most financial sectors in Japan.
The computer-driven Nomura Global Trend fund began trading last week and is the first onshore Japanese fund to be launched by Man’s AHL unit. It will invest in a mixture of assets via three currency baskets, one of which includes the Chinese renminbi.
The launch of the Nomura Global Trend fund was delayed by the March 11 disasters, but sales of the product — launched in a joint effort with Nomura — have topped analyst expectations by around three times, adds Reuters, citing Man sources.
Some 15 per cent of Man’s assets are based in Japan, a fact that weighed on the group’s shares following the disasters and nuclear crisis. But the shares have rebounded by about 4 per cent since April, as Japan’s reconstruction programme gathers pace.
None of this, of course, has been lost on other large hedge fund groups, many of which are reportedly eyeing more Japan involvement as we write….
Related links:
Japan’s hedgie trap – FT Alphaville
Jabre’s $300m error (Japan dunnit) - FT Alphaville
Tokyo: who’s in the money – FT Alphaville
Japan – to buy or not to buy? – FT Alphaville