Offshore investment specialist Liberty Ermitage has teamed up with Finaltis, a Paris-based hedge fund consultant, for the creation of a Japanese fund of hedge funds.
The Japan absolute fund is a Luxemburg-based Sicav that will initially invest in six equity hedge funds that focus on Japan. Long and short equity strategies will be used to produce capital growth for investors, independently of movements in the Japanese stockmarket. The other objective is to protect the capital from too much risk.
Liberty Ermitage already runs five funds of hedge funds, including the North American absolute fund and the European absolute fund. It decided to add the Japan absolute fund to its product range because the country's changing economic and political environment is throwing up opportunities for hedge funds to exploit. Some Japanese businesses are restructuring through mergers and acquisitions, while stocks remain cheap.
The fund of funds will draw on Liberty Ermitage's 15-strong research team, which uses a top down and bottom up approach. The team analyses around 4,000 hedge funds and it includes Asian specialists who travel to Japan to conduct first-hand research.
Unlike the Mellon Nippon absolute return fund, the Liberty Ermitage fund does not diversify across equity hedge and arbitrage strategies, so investors are relying on six funds that use the same long and short approach.
The fund is likely to attract institutional investors and high-net-worth clients looking for diversification, who are upbeat about Japan's recent rally after 17 years in the doldrums. However, the rally may be short-lived and the fund managers need to have their fingers on the pulse when short selling stocks.