Lotus Peak Capital Pte, a Singapore-based investment manager, will start a fund of hedge funds to benefit from Japanese Prime Minister Shinzo Abe’s efforts to stoke the world’s third-largest economy.
The Abenomics Long Short Fund will start on Feb. 3 with about $15 million of initial capital from Swiss and Asian family offices, Managing Partner Stephane Pizzo said. It will invest in 10 Japan-focused managers across different strategies with a preference for equity markets, he said.
Lotus Peak, which has allocated money to these managers for the past 2 1/2 years, created the product after hedge funds that invested in Japan became the world’s best performers last year. The Eurekahedge Japan Hedge Fund Index returned a record 28 percent in 2013 as Abe boosted spending and the Bank of Japan embarked on an unprecedented monetary easing, an approach dubbed Abenomics.
“Japan is one of the best opportunities in Asia and even globally for the next few years,” Pizzo said in a telephone interview in Singapore. “Japan has been underweight globally in the investors’ portfolio because over the past years, it was not performing. Now going forward, it’s a good opportunity to have one product to participate in this Abenomics move.”
Funds of funds research individual offerings to spread investors’ money across a variety of managers.
The Abenomics fund will mainly invest in long-short equity funds that bet on both rising and falling prices, while the rest will be allocated to strategies including long only and arbitrage, Pizzo said. Arbitrage funds attempt to profit from price discrepancies between markets.
The J-Wellness Fund, which focuses on Japan’s health-care industry and employs a long-short strategy, is one of the funds Pizzo invests in, he said. The $50 million fund returned 40 percent in 2013 by focusing on structural changes in the industry, said Takashi Yabuuchi, chief executive officer of Bridge Capital Asset Management Co., the investment manager of the fund.
It also invests in the Kotoshiro Fund, which employs a long-short equity strategy and is run by Tokyo-based United Managers Japan Inc., Pizzo said. The $104 million fund returned 32 percent last year after taking out fees, Chief Executive Officer Masahiro Koshiba said.
“We think it’s a longer-term trade,” Pizzo said. “It’s an investment opportunity that has potential to stay for a few years.”