July 13 (Bloomberg) -- Winton Capital Management Ltd., the U.K. hedge fund with $12 billion in assets, will start a new fund in Japan and hire staff in Hong Kong as it expands when rivals such as Citadel Investment Group LLC retreat from Asia.

The London-based firm is going to advise a new fund sold to Japanese retail investors through Mitsubishi UFJ Securities Co. that will track the performance of its flagship commodity trading adviser fund as it seeks a slice of the nation’s $15 trillion in personal savings.

In Hong Kong, where it opened its first overseas office in December, Winton is looking to hire one or two researchers with expertise in the Chinese markets, and in London, it’s seeking someone to market for the region, Charles Allard, head of business development for Asia, said in an interview on July 9.

“Asia is going to be the place that will provide growth opportunities,” Allard, 44, said. “We wanted to be well prepared to capture that.”

The expansion comes after the worst financial crisis since the 1930s forced rivals including Citadel and Och-Ziff Capital Management Group LLC to cut jobs or close offices in Asia as they focus on their largest markets.

Winton invests in financial assets that include equities, currencies, bonds, commodities, livestock and energy, using computer-driven trading models known as managed futures to benefit from market trends. Its flagship Winton Futures Fund returned 21 percent in 2008, and has lost 7 percent this year through June, according to the company.

‘Important Market’

Winton -- founded in 1997 by David Harding, one of the original partners in a trading system at Man Group Plc -- began selling funds in Japan in 1999. The new fund, which Mitsubishi UFJ will sell at the end of this month, will be the third offered to Japanese retail investors through the Tokyo-based brokerage.

“Japanese investors are very sophisticated and it houses very strong financial system infrastructure that makes it easy for us to offer our funds,” Allard said.

The new fund will be offered in Japanese yen, U.S. dollars and Australian dollars, and will be structured by the Japanese brokerage unit of Deutsche Bank AG. Winton raised about 130 billion yen ($1.4 billion) through the two earlier funds, according to Hideyuki Sago, general manager of Mitsubishi UFJ’s structured products division.

New Fund

The new fund, which will be based in the Cayman Islands and is called the Palladium Japan Trust -Performance of dbX-Winton Linked Fund, doesn’t guarantee the initial investment, unlike Winton’s previous Japanese offerings. That means it will follow the performance of Winton’s flagship fund more closely, Sago said in an interview in Tokyo on July 10.

Managed futures funds gained an average 0.5 percent in the first six months of this year, according to data by Singapore- based Eurekahedge Pte. They returned 17 percent in 2008, making it the most prosperous strategy among nine categories.

“Since we’re not seeing the kind of returns we saw in 2008 among the CTAs this year, it will be a challenge for us, but demand is definitely there,” Sago said.

In Hong Kong, Winton employs three staff, headed by Gerhard Moeller, who was a principal managing scientist heading up teams engaged in scientific research in London for Winton. The office was set up to strengthen China research ahead of further deregulation in futures markets, Allard said.

China’s securities regulator reiterated in March that the government plans to allow index futures contracts to begin trading this year, a move designed to increase investment options in the country’s capital markets.

Citadel, the Chicago-based firm run by Kenneth Griffin, which said in December it will close its Tokyo office and cut other Asian operations. Och-Ziff Capital, the New York-based hedge-fund manager that went public in 2007, cut six jobs in Asia earlier this year.

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: July 12, 2009 22:06 EDT