Martin Currie is taking its first step into the hedge fund arena with the launch of a long/short Jap...
Martin Currie is taking its first step into the hedge fund arena with the launch of a long/short Japanese equity fund.
The Martin Currie Absolute Funds Japan will be run by a team headed by Michael Thomas and Keith Donaldson and will attempt to profit both from the companies that are succeeding in the New Economy and also from the stocks that suffer because of the sell-off of cross-held shares.
Andy McLeod, who heads the marketing for offshore funds, said: "This is our first venture into hedge funds. We have a good Japanese team with an excellent long-term track record. The Japanese market lends itself to hedge funds - in some ways it is quite inefficient."
The new fund will hold long positions in approximately 30-40 stocks. This is some 20 stocks fewer than the mainstream onshore Japanese fund run by the same team. Each stock will be equally weighted. The fund can be geared up to 100%, a facility provided by the fund's prime broker, Morgan Stanley.
Using this facility, 140% of the value of the fund will go on long-term equity investments and 20% will go into short plays.
The team will be looking especially hard at the steel, chemical and textiles sectors. These contain many of the companies that are part-owned by their banks.
As the banks come under pressure to sell these shares the prices should sink and a shorting strategy will hopefully bring rich rewards.
The management team will be judged primarily on its ability to choose the short plays, if only because that is the new discipline. Mcleod is confident, after having run a dummy portfolio for a year, that the results will not disappoint.
This is the first fund to be launched under a new umbrella and others will join.
The fund is Bermuda-domiciled and Dublin-listed. There is an 1% annual management charge and a 20% charge on performance above the benchmark, which will probably be the Topix. Mcleod is currently recruiting subscribers. The fund will be closed at the end of June, after which it will be tradable on a monthly basis.
Meanwhile, another offshore fund that was due to be launched has been put on hold because of political upheaval in the area in which the fund was due to invest.
The Martin Currie African Opportunities fund was to invest predominantly in listed South African equities, but also more generally in sub-Saharan African companies. Up to 15% of the fund's assets could have been invested in unlisted, pre-IPO companies.
Political and military disturbances have struck both Eritrea and Sierra Leone, but it is the violence in Zimbabwe that has caused the rethink, even though South Africa itself has not been endangered by these events.
McLeod believes that investors are still positive on the region and the plan is to launch the fund soon after the situation in Zimbabwe is resolved.
The African Opportunities fund was to join the suite of specialist funds with a relatively aggressive risk/return strategy.
This specialist series includes the Near East Opportunities fund, run by Chris Butler, the same manager that was going to run the Africa fund until political turmoil grounded the plan.
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