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D.E. Shaw Aims to Capture More Japan Pension Money, Gaudio Says

D.E. Shaw & Co., the $20 billion asset manager founded by David Shaw, aims to capture more money from Japanese pension funds by adding staff and offering alternative investments such as hedge funds.

The money manager, whose Tokyo office has two employees including country representative Scott Roney, plans to hire or relocate staff from other parts of the world, said Julius Gaudio, who oversees the Asian business of the New York-based firm.

“Assets from Japanese clients will grow substantially over time,” Gaudio, 40, who moved to Hong Kong last month from New York, said in an interview in Tokyo on Dec. 3. “I’m personally excited to get more involved in the pension space -- given Japan’s unique demographics, pension asset management is particularly compelling here.”

D.E. Shaw joins foreign asset-management firms such as Neuberger Berman Group LLC and Robeco Group that are trying to capture a slice of Japan’s more than 60 trillion yen ($727 billion) corporate pension market, as retirement funds seek to diversify from traditional asset classes such as bonds and equities.

D.E. Shaw, which opened its Tokyo office in September, has “several hundreds of millions of dollars” from Japanese clients including financial institution and pension funds, said Gaudio.

‘Plant the Seed’

“The pension business takes time to develop in Japan,” Roney, 47, who opened Pacific Investment Management Co.’s Tokyo office in 1998, said in the same interview in Tokyo. “We want to start planting the seeds with pensions, knowing that it’s probably a multiyear process.”

Japanese pension plan returns have been weighed by two decades of slumping markets, an aging population, and a dependence on retirement packages immune to investment performance.

“In Japan’s corporate pension sector, I believe the average allocation to alternatives is 10 percent or more,” said Roney. “That’s a relatively high amount, so we see a lot of activity there that’s very exciting.”

The firm offers multistrategy hedge funds that trade everything from equities to fixed income, structured equity products and equity 130/30 funds, which wager on rising as well as declining share prices, among its products.

D.E. Shaw, which has been investing in the region for 22 years, has had a presence in Asia since 1996 starting with its office in Hyderabad, in the Indian state of Andhra Pradesh. It now has six locations in Asia, including Shanghai, and Mumbai, according to Gaudio.

“There is still plenty to do in Japan,” Gaudio said. “It is in some ways an often overlooked economy and market because a lot of people are focused on higher growth emerging markets, so we’re still very busy finding plenty to do.”

Shaw, a former Columbia University computer science professor, founded D.E. Shaw in 1988. He ceded oversight of his firm to a six-person committee in 2002, when client assets were about $2 billion.

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