Nov. 6 (Bloomberg) -- Tetsuo Tanimura, former chief executive officer of Tower Investment Management Co., set up his own hedge-fund consulting firm this month in a bid to help new funds expand their businesses.

Tanimura, who departed Tower in September, said his Tokyo- based C2G Advisors Co. will seek startup hedge-fund managers in Asia with good performance and match them with potential investors in Japan as funds struggle to raise cash in the wake of the global financial crisis. The firm may also provide capital to new hedge funds and investor services including due- diligence.

At Tower, Tanimura helped grow the firm’s asset under management to about 330 billion yen ($3.6 billion) at its peak in October 2005 from 700 million yen when the firm started in 1998. He aims to take advantage of the network he has harnessed with various pension funds and endowments, including about 80 funds which Tower had as clients, in matchmaking with overseas hedge funds seeking to tap the Japanese market, Tanimura said.

“There’s a lot of great talent out there that’s struggling to raise funds, and that’s where the opportunities are,” Tanimura, 52, said in an interview in Tokyo yesterday. “I want to find the second and third Tower Investments in the region and help them grow their businesses.”

His departure from Tokyo-based Tower, which Tanimura started with chief investment officer Tatsuro Kiyohara in 1998, follows the slump in the hedge-fund industry last year in the wake of the collapse of Lehman Brothers Holdings Inc.

Wider Offerings

As managers begin to offer Asian hedge funds that go beyond the equity-related strategies that dominate the industry, there will be more opportunities for investors seeking diversity, Tanimura said.

Equity pools accounted for 70 percent of Asian hedge funds in the third quarter, while so-called relative value, macro and event-driven strategies accounted for 17.6 percent, 5.1 percent and 6.9 percent respectively, according to Chicago-based Hedge Fund Research Inc.

Tower has returned about 80 percent this year after its flagship fund lost about 40 percent in 2008 amid the Lehman crisis, Tanimura said.

The fund has specialized in investing in Japanese companies, employing a so-called long-short strategy where managers profit from rising and falling stocks. In a short sale, a trader borrows stock and sells it in the hope it can be bought back later at a cheaper price.

Japan Opportunity Declines

Shinya Fujiwara succeeded Tanimura at Tower, and Kiyohara, who paid Japan’s biggest tax bill of 3.7 billion yen in 2004, remains as its fund manager, according to the firm. Tower will continue to manage their own money and anchor investors’ funds.

With a declining population and aging society in Japan, opportunities to make money through employing a long-short strategy by betting on Japanese equities have declined, forcing managers to restrict the amount of money they can manage, Tanimura said. That contributed to his reason for leaving Tower to set up his own shop, he said.

Asian hedge funds are making a comeback, beating global peers, as the region leads the world’s emergence from the worst recession since World War II and record losses in 2008.

A measure tracking the region’s hedge funds has gained about 22 percent this year through October, beating the global index, which has gained 16 percent, according to Eurekahedge Pte. Japan’s funds haven’t fared as well, returning 8.2 percent.

Asia Evolution

The Asian hedge fund industry is evolving away from its historical concentration in equity hedge strategies to include event-driven, macro and arbitrage strategies, Ken Heinz, president of Hedge Fund Research, said in an e-mail.

“In contrast to the first half of 2009, when Asian hedge fund gains were supported by strong equity market gains, in the third quarter Chinese equity markets were essentially flat,” Heinz said.

Asian hedge-fund assets increased to $73.7 billion in the third quarter, helped by the first net inflow of capital in more than a year, according to a report by Hedge Fund Research. The increase in assets included $800 million of new capital, the firm said.

Tanimura, who formerly worked at brokerages including Nomura Holdings Inc. and Credit Suisse First Boston, said he named the firm C2G, which stands for various meanings including “cradle to grave,” and “commitment to grow” and is seeking to open offices in Singapore and Greenwich, Connecticut.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether the price of assets will rise or fall.

To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net; Komaki Ito in Tokyo at kito@bloomberg.net

Last Updated: November 5, 2009 21:55 EST