Fivestar Plans Dollar-Based Japan Hedge Fund to Lure Foreigners

Jun 12, 2014 1:35 am ET

June 12 (Bloomberg) -- Fivestar Asset Management Co., a Japanese investment firm, plans to start a dollar-based hedge fund that will invest in Japanese stocks, amid growing interest in the market from foreign investors.

Fivestar is seeking to raise 10 billion yen ($98 million) within a year for both the new fund and its existing yen- denominated Shinbi Japan Equity Long Short Fund, said Masamitsu Ohki, who runs the strategy. The Japanese currency-based fund started at the end of March with 1 billion yen and the return was about zero in the first two months, he said.

Interest in Japan’s stock market by overseas investors has increased since Prime Minister Shinzo Abe pledged to revive the world’s third-largest economy by pushing measures including a reduction in corporate tax and a review of the Government Pension Investment Fund’s portfolio, Ohki said. The benchmark Topix index capped a world-beating rally last year, surging 51 percent, and has since declined more than 5 percent this year.

“Since the rally in June last year, the positive factors surrounding the Japanese stock market have become clear,” Ohki, 48, said in an interview in Tokyo yesterday. “The future of Japan’s stock market will depend on foreigners.”

Ohki’s strategy is to take long positions in as many as 150 Japanese companies, while making short bets in 50 to 100 stocks and targets an annual return of 20 percent, he said.

The Eurekahedge Japan Hedge Fund Index declined 1.4 percent in the first five months of this year, based on preliminary figures, after returning a record 28 percent in 2013.

Rising wages and a shortage of labor in Japan are among the investment risks, Ohki said. Companies including Zensho Holdings Co., a restaurant-chain operator, Watami Co., which runs Japanese-style pub chains, and Tsukui Corp., which provides nursing care services at home, are among those that may be affected, he added.

Ohki joined Tokyo-based Fivestar in February from Japanese hedge-fund manager Stats Investment Management Co., where he managed 7 billion yen until he left in December, he said. The Ginga Explorer Fund, which Ohki managed at Stats from July 2010 until his departure had annual return of 25.05 percent, he said.