- Long-short equity fund had annual losses in last two years
- Assets fell to $10 million from $100 million peak in 2012
Sumitomo Mitsui Trust Holdings Inc. is liquidating a Japan-focused hedge fund after investors withdrew money following poor performance, according to people familiar with the matter, adding to the list of casualties as the industry suffers its biggest outflows since 2009.
The firm’s asset-management unit is liquidating its Sumi Trust Japan L-S I Alpha after client redemptions cut assets to just over $10 million, said one of the people, who requested anonymity discussing private information. Launched in 2007, the fund’s assets peaked at about $100 million in 2012 and suffered annual losses over the last two years, the person said.
Redemptions are mounting at hedge funds as investors are pushing back against poor performers amid volatile markets. They pulled an estimated $25.2 billion from hedge funds globally in July, the most since February 2009, according to data from eVestment. Asian hedge funds have also struggled, with investors withdrawing a net $7 billion this year through the end of July, the data show, bringing total assets in the region to $55.3 billion.
Money managers and hedge funds in Japan have been especially hard hit as they’ve struggled to anticipate how the central bank’s policy of negative interest rates and asset purchases would impact markets. Stock market declines and unexpected events such as Brexit have also spurred losses, prompting investors to take cover. Clients have removed almost $1.8 billion from Japanese hedge funds in the first half of the year, the highest since at least 2014, according to data from Hedge Fund Research Inc.
The Sumitomo Mitsui Trust long-short equity fund, which sought to achieve returns in both up and downward-trending markets, declined in four of the last eight full years, according to data compiled by Bloomberg. The vehicle lost 0.2 percent in 2014 and 9.5 percent in 2015. It fell 5.6 percent this year through the end of June, the data show. A spokesman for Sumitomo Mitsui Trust, Japan’s fourth-biggest lender by market value, declined to comment.
Hedge funds investing in Japan lost 3.6 percent since the beginning of the year until the end of August, compared to a 1 percent gain by funds in the rest of Asia, according to data provider Eurekahedge Pte.
As returns have slumped, many firms have thrown in the towel. JPMorgan Chase & Co.’s investment unit said in an August letter to investors that it’s liquidating the JPMorgan Funds - Japan Market Neutral Fund. Launched in June 2011, the fund will liquidate after assets dipped to about $17 million as of Aug. 4 following “significant redemptions” in recent months, the firm said in the letter.
Earlier in the year, Carl Huttenlocher’s Myriad Asset Management closed down a Japan-focused hedge fund due to a change in its view on the government’s ability to end deflation through stimulus, said a person with knowledge of the matter in May.