Edgebell Becomes First to Expand Hedge Fund Under New Japan Rule
Edgebell Capital Co., run by former bankers at Goldman Sachs Group Inc. and Mizuho Corporate Bank Ltd., will start raising money for its global macro hedge fund from institutional and overseas investors after approval from Japan’s regulator under a new fund rule.
The fund, set up in April 2011 to wager on trends in stocks, bonds and currencies, has only been available to domestic individuals, said Chief Operating Officer Kazuho Suzuki, who set up Edgebell with Masaru Koibuchi. The company obtained approval from the financial regulator on Nov. 20 to act as a discretionary investment manager. It plans to set up a new Cayman Island-based fund as early as February, he said.
Japan relaxed rules governing fund management companies in April, including staffing and minimal capital requirements for those seeking to only sell to certain investors. Edgebell is the first hedge fund to get a license under the new rule and may pave the way for other managers, who had favored Singapore and Hong Kong because of easier registration processes, to set up in Japan.
“With Edgebell’s approval marking the first hedge fund under the new licensing system, there are some expectations that those with limited capacity will follow suit,” said Skip Hashimoto, the Tokyo-based Japan representative at Ogier Fiduciary Services, which provides administrative services to hedge funds.
The Edgebell Capital Global Macro Strategy returned about 2 percent from April 2011 through March this year when the Tokyo- based company decided to return money to investors to apply for the new license, Suzuki said. Edgebell is seeking to raise about 5 billion yen ($61 million) in the first year, from about 1 billion yen to 2 billion yen at the start, by making the strategy available to outside investors through the offshore fund, he said.
Startup funds in Japan typically register as investment advisory firms that give investment advice to a fund first, while investment managers overseas manage the funds. They then apply for a discretionary investment management license to run their own funds after expanding their businesses.
“We expect investment advisor license holders in Japan to consider ’upgrading’ to this license in order to further solidify their presence within the Japanese market,” said Ogier’s Hashimoto.
Under the new so-called DIM-Pro rule implemented April 1, companies are required to only have 10 million yen in capital compared with the previous 50 million yen, according to Suzuki. The required number of employees has been more than halved to about three; investors in the funds have to have held more than 300 million yen in financial capital for more than a year and the funds cannot manage more than 20 billion yen, he said.
“The hurdle to entry has been lowered and we really hope that this will start creating a trend where hedge funds will set up shops in Japan,” Suzuki said. “I’m hoping for a revival and regain in confidence for the current Japanese fund industry.”
Koibuchi was the former head of corporate derivatives structuring at Goldman Sachs in Japan, and Suzuki used to head equity index investments at Mizuho Corporate.
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