New York-based hedge fund firm, Alternative Investment & Financial Asset Management (AIFAM), has launched a Fund of Funds – the Hedged Equity Fund - with USD17 million in internal capital as it looks to provide Japanese corporate pension funds with an alternative investment solution. Various reports this year have highlighted Japan’s growing acceptance to begin allocating its pension funds, which total some 60 trillion yen (USD744 billion), into more diversified products as it looks to address liabilities by generating healthier annual returns; 10-year Japanese Government Bonds currently yield 0.95 per cent. AIFAM already has an Asia connection through an existing partnership with Tokio Marine Asset Management, which owns a quarter of the firm; in 2007 they rolled out a jointly managed multi-strategy fund. Alongside existing managed accounts that use an Equity L/S strategy, and which have on average yielded 2 to 3 per cent since 2006, this new FOF will follow suit and will hope to raise USD150 million in its first year by securing pension fund assets.
AIFAM’s CIO, Takuma Aoyama, told Bloomberg this week that the fund would have roughly a USD1 billion ceiling. “Japanese pension funds are faced with serious problems,” said Aoyama. “We’re going to offer a fund that will allow investors to shrink their losses with the same capital they may invest in other asset classes.” The fund will aim to generate annualized returns of 6 per cent using an investment portfolio of 12 to 15 global Equity L/S funds, five of which would focus on finance, healthcare and technology sectors. It will also avoid charging management fees to fund managers to curb unnecessary risks. As of end-June 2010, AIFAM had USD596 million in AUM.