BDT launches first hedge fund and targets Japanese equities

long/short fund to be managed by calender and dobson

BDT will launch its first hedge fund on 1 March, focusing on Japanese equities.

The long/short dollar denominated fund will also take small positions on currency.

Andrew Calender and Simon Dobson, who worked together previously at Invesco, will manage the fund. Calender managed the Invesco GT Japan Growth Fund and Invesco GT Japan Fund from 1988 to 2000. Dobson previously managed Invesco's Japan Investment Trust.

The fund will take around 60 positions with neutrality between long and short. The higher number of positions reflects the Japanese market being at a 13-year low and the managers' desire to spread the short positions, according to Calender.

Individual short positions will be 1% to 1.5% of the portfolio. Longs will generally represent 2%-3% each, but may be up to 5%. Turnover will be relatively low. 'If we are spending time on fundamental analysis of companies, we should not need to turn the portfolio over rapidly,' Calender said.

The managers will pick stocks using both bot- tom-up and top-down analysis.

Certain sector bets exist on the long and short sides in Japan, according to Calender.

'Japan's car manufacturers are good long bets,' he said, 'while in manufacturing, Japan is still competitive in high technology, but its market share is being eroded at the low technology end.'

Domestically, niche growth sectors exist mainly in services, which could provide prolonged growth, he said, and many opportunities also exist in new companies unencumbered by the past 40 years of corporate Japan.

Good short sectors include commodity manufacturing such as semi conductors, which is facing foreign competition. Calender added foreign involvement in Japanese firms may also bode well for them.

The fund managers also look at a company's ability to control pricing, take market share as well as directors' views on creating shareholder value and the structure of the balance sheet and status of the pension fund.

However, the risks of investing in Japan, include the government's history of interfering with the market place, especially with currency, he said.

Last year, the government also aligned Japanese rules on short selling with America's so a short sale could only be made on up-ticks in share value.

'Interventions in the market can be unpredictable and usually create short-term risk,' Calender said.

The fund will launch with seed capital of around $10m and is unlikely to hold more than $250m before closing, charging a 1% management fee and 20% performance.