Chris Redl, a former fund manager at Och-Ziff (OZM) Capital Management Group LLC, plans to start a long-short hedge fund in April that will invest in Japan’s most traded companies such as Toyota Motor Corp. and Canon Inc.
The Carnico Japan Fund will start with initial capital of about $20 million to $30 million on April 1, with New York-based Wolver Hill Advisors LLC as the anchor investor, said Redl, managing partner of Singapore-based Siena Capital. Redl is joined by Dean Kimpton, a former sales trader at Instinet Inc. in Tokyo, who will be the chief trader, he said.
New hedge-fund offerings globally outpaced closures for the first time since 2007 last year, and startup funds in Japan garnered $317 million in 2010, according to Hedge Fund Research Inc. and AsiaHedge New Funds Survey. He joins a breed of managers who are setting up their own shops in Asia after working at global financial firms.
“Hedge fund investors are looking for new funds, but still have a hard time pulling the trigger on very small startups, rightly or wrongly,” said Kirby Daley, a Hong Kong-based senior strategist with Newedge Group’s prime brokerage business. “Managers with experience at large hedge funds or in the prop trading groups being spun out of the banks are the only real exceptions right now, with many of them being given the benefit of the doubt with early stage investments.”
Redl left Och-Ziff, the New York Stock Exchange-listed hedge fund run by Daniel Och, in 2009. Och-Ziff’s assets under management rose to $28.4 billion as of Feb. 1, according to the firm’s earnings statement last month.
In preparation for the fund’s start, Redl ran the long-short equity strategy last year, betting on rising and falling stock prices. He had a 10 percent return from April 1 through Aug. 31, based on data audited by Ernst & Young, compared with an 18 percent drop during the same period by Japan’s benchmark Topix index. In a short sale, a trader borrows stock and sells it in the hope it can be bought back later at a cheaper price.
A total of 935 hedge funds opened in 2010, topping each of the prior two years and the most since 2007 when almost 1,200 funds started, according to HFR, a Chicago-based industry researcher. Closures totaled 743 last year, the fewest since 2007 and almost half the record 1,471 in 2008, HFR said.
Morgan Sze, global head of Goldman Sachs Group Inc.’s principal strategies proprietary trading desk, and Charlie Chan, a former Credit Suisse Group AG proprietary trader, are among expected “high-profile” startups, according to the AsiaHedge New Funds Survey published last month.
Japan-focused hedge funds have returned 3 percent so far this year through February, outperforming the 1.3 percent returned by the Eurekehedge Hedge Fund Index, which tracks more than 2,500 funds globally.
The Carnico fund, named after Redl’s sons Carlo and Nico, focuses on stocks with trades amounting to $10 million a day on average over the past three months and on companies where Redl has met directly with company officials.
“I have to have the word from the horse’s mouth in order to invest with conviction,” Redl, 44, who also worked as an equity analyst in Japan at brokerages including Morgan Stanley (MS) and UBS AG (UBSN), said in an interview in Tokyo yesterday. “Japan has its reputation of being a laggard in Asia, but we actually think it’s a great market to invest in -- in terms of liquidity, long and short, this is the best market in Asia.”
The fund will invest in 50 to 70 stocks, said Redl, who visits about 200 companies a year. The portfolio is built around the quarterly earnings results, while risk-management is overseen minute-to-minute, allowing the fund to be liquidated within a couple days if necessary, he said.
“Every quarter there is an exit strategy for the investments we have and every quarter there is a new story waiting to happen,” Redl said. Still, “when there is a trend that happens, you don’t fight it, you get out and be scared.”
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.
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