FRM Capital Advisors (FCA), the seeding division of Man Group’s fund of hedge funds operation FRM, is to make a significant investment in a new Japan-focused hedge fund launched by Hong Kong-based investment adviser Arena Capital Management.
Arena, which was established by chief investment officer Toby Bartlett – ex-Citadel and Highbridge Capital Management – in May 2012, manages a Japanese long/short equity strategy with a focus on domestic demand stocks, and constructed with a factor neutral pair trading book.
The investments will be FCA’s first since its parent FRM Holdings was acquired by Man in May.
Joining Bartlett at Arena are Greg McLaughlin (chief operating officer), Ayumu Kuroda (head of trading and risk systems) and Yukimi Oda (research analyst).
Patric de Gentile Williams, head of seeding at FRM says: “This deal reinforces the global nature of FCA as a seeding business and is the first investment we have made since FRM was acquired by Man last year. Asia, and specifically Japan, is an important focus in our manager research, where we have a local office and a significant investor base.
“Arena’s focus on Japanese domestic demand sector is unique and Toby has extensive experience in researching and investing in this space from his time at Highbridge, Citadel and Fidelity Investments Japan. We see this both as an opportunity to be able to generate alpha in what is traditionally a less researched market by hedge funds where greater inefficiencies will allow managers that do in depth analysis to create an edge, and as an opportunity to attract assets from investors looking to allocate to pure Japanese long-short equity funds.
“In addition, the recent drop in the Yen and newly elected Prime Minister Abe’s growth-focused economic strategy has caused a substantial rally in the domestic market that may spur meaningful investor interest.
“Toby has consistently demonstrated his ability to run a successful portfolio within a robust risk management framework and with FCA’s support he will be able to build a successful alternative investment management business to the benefit of his investors, his team and FCA’s investors.”
Bartlett says: “As a new hedge fund, this major investment by FCA allows us to focus all our energies on operational excellence and generating high quality returns for our investors.
“Our focused approach to fundamental research in Japanese equities, combined with disciplined portfolio construction and risk management, allows us to have low correlation to markets and protect against downside volatility whilst capitalizing on market opportunities for our investors.
“This strategic relationship with FCA is a major endorsement of the investment process and business principles of Arena.”