Highbridge Alumnus’s North Asia Hedge Fund Trails Japan Rally

Arena Capital Offshore Fund, a Japan-focused hedge fund run by Highbridge Capital Management LLC alumnus Toby Bartlett, trailed its peers even as the nation’s stocks surged to the highest since 2008.

The $44 million hedge fund, backed by a division of Man Group Plc (EMG), returned 2.6 percent this year through April, according to its April newsletter to investors seen by Bloomberg News. This year’s gain compares with the 8.8 percent return by the Eurekahedge Asia Hedge Fund Index and the 19 percent gain by the index that tracks Japan-focused funds.

Japan’s benchmark Nikkei 225 Stock Average (NKY) surged to the highest since June 2008 last month as Prime Minister Shinzo Abe and the Bank of Japan expanded money supply to beat deflation, weakening the yen and boosting earnings of exporters. The fund, which employs a market-neutral strategy that seeks to profit regardless of market directions, is focused on risk-adjusted returns used by investors to measure performance, said Arena Capital Management Ltd.’s Chief Investment Officer Bartlett.

“There is ample demand for market-neutral hedge funds,” he said in an e-mailed response. “Considering the large directional move in the market year-to-date, we believe that low-volatility market-neutral strategies are an even more attractive option for investors.” He declined to comment on the fund’s specific performance, citing confidentiality agreement with investors.

The fund, which began trading in October, lost 0.3 percent in its first three months of trading.

Japan Bets

The fund, which was 100 percent invested in Japan at the end of April, doesn’t take a view on the market or industries, minimizing such risks by trading buckets of related stocks, according to the newsletter. Net exposure, the difference between its bets on rising and falling stocks, was below 2 percent, the newsletter showed.

It targets mid-teen annual returns and invests in liquid stocks mainly in Japan and North Asia domestic-demand-related industries, the newsletter said.

Man Group’s FRM Capital Advisors Ltd. division invested $25 million in the Arena fund, Patric de Gentile-Williams, FRM’s head of seeding, said in an e-mail in January.

Bartlett was an Asian equities fund manager at Highbridge between 2009 and 2011, focusing on consumer-related companies, according to an FRM Capital Advisors statement in January. He worked for Citadel LLC between 2007 and 2009 as a fund manager running Japan-focused stock investments.

To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net.

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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