Japan's FGI launches $500 million event-driven hedge fund

November 28, 2011

RECORDER REPORT

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Japanese hedge fund FGI Capital Partners has launched an Asia event-driven fund, aiming to tap fresh demand from institutional investors including Japanese and foreign pension funds, a top executive said. The fund started trading on Nov. 1 and has capacity to take in up to $500 million, Hideyuki Omokawa, representative director and president of FGI Capital, told Reuters in an interview.

"Uncertainty prevails in markets overall. In this kind of situation, we thought the event-driven strategy would be more in demand to generate alpha," said Omokawa, a former Nikko Securities and Goldman Sachs executive.

Event-driven funds focus on mergers and strategies such as capital structure arbitrage, in which managers can profit from anomalies in a firm's capital structure, for instance by buying a high-yield bond and shorting the equity, thereby hedging out equity risk.

Omokawa, who founded FGI, formerly known as OGI Capital Partners, in 2009, declined to disclose the start-up capital for the fund. It changed its name in May.

FGI hired Ryota Ohno from Morgan Stanley in July to manage the fund, Omokawa said, adding that he was targeting pension funds, family offices and funds of funds to raise capital.

The launch comes at a time when investors are shying away from allocating fresh capital to Asian hedge funds as the debt crisis in Europe and sluggish growth in the United States keep them on the sidelines.

Asian hedge funds saw a net outflow of $2.2 billion in September and October, erasing nearly a third of the net inflows in the previous eight months, data from Eurekahedge showed.

An event-driven strategy is the third most popular hedge fund strategy in Asia behind equities long/short and multi-strategy, and accounted for $18.4 billion at the end of August, according to Eurekahedge.

FGI Capital Partners, which closed its Japanese equities long-short fund and a Japanese equities deep value fund in June, currently manages $140 million in a global macro hedge fund. The two closed funds managed about 3 billion yen ($38.72 million).