Sparx Group Co. Ltd | Hedge Fund Tracker Notes

Sparx Group Co Ltd

Sparx Group Co. Ltd | Hedge Fund Tracker Notes

The following piece on Sparx Group Co Ltd is being published as part of our Hedge Fund Tracker Tool, our daily effort to track hedge funds in the industry.

Resource #1 (7.16. 09) Sparx Open Global Macro Hedge Fund

Sparx Group Co., Asia’s biggest hedge-fund manager, plans to start its first global macro fund, adding a strategy that was among the few winners in 2008 when an equities rout led to the only annual loss in its 20-year history.

The fund, which will wager on trends in stocks, bonds and currencies worldwide, will be sold to institutional investors in the next few months as Tokyo-based Sparx expands beyond equity- related offerings, President Shuhei Abe said. He declined to give the fund’s size, saying that and other details are still being worked out. Source

Resource #2 (5.22.09) Sparx Group Co., Asia’s biggest hedge-fund manager, posted a 23.3 billion yen ($243 million) full-year loss on the worst market slump since the Great Depression.

The deficit for the period ended March 31 compared with profit of 3.2 billion yen a year earlier, the Tokyo-based company said in a statement today. Revenue plunged 76 percent to 7.3 billion yen from 30.6 billion yen a year earlier.

Assets under management shrank more than 40 percent last fiscal year, the company said. It stood at 674 billion yen in April, based on preliminary data from the company. That compared with a peak of 2 trillion yen in August 2006.

To counter the slump, Sparx President Shuhei Abe is cutting costs including executive pay, closing the firm’s business in London, and retreating from the U.S. market. source

Sparx Group Co., Asia’s biggest hedge-fund manager, dropped to a record low in Tokyo trading on concern that declining stock prices will undermine its asset- management business. The stock rebounded to close higher.

Resource #3 (1.16.09) Sparx slid as much as 10 percent to 9,770 yen on the Jasdaq exchange, its lowest since listing in December 2001, before closing 0.9 percent higher at 11,000 yen. The stock has slid more than 70 percent in the past year, compared with the 37 percent drop by the benchmark Topix index.

The Nikkei 225 Stock Average slid below 8,000 yesterday as bigger-than-estimated drops in machinery orders and U.S. retail sales fueled concern the global recession is deepening. Companies including Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, and Sony Financial Holdings Inc. yesterday announced valuation losses on their equity holdings.

“Continuing stories about valuation losses and equity exposure have spooked the market,” said Paul Migliorato, an analyst at NamiNori LLC, a Honolulu-based equity research firm. “The threat that forced corporate and institutional selling is hitting the shares of Japan’s few listed fund managers as well.” source

Resource #4: (12.1.08) While many Western hedge funds are scaling back their operations in hard-hit Asia, or eliminating them altogether, the region’s largest hedge fund manager is doing the opposite.

Tokyo-based Sparx Group, which has seen its assets under management fall by almost 60%, said it will close its U.K. office and drastically reduce its U.S. presence after posting a first-half loss of ¥1.15 billion (US$11.6 million). The hedge fund has announced plans to slash annual fixed costs by about 20%. source

Resource #5: (11.12.08) Asia’s biggest hedge fund firm is feeling the region’s pain. Sparx Group said today that its profits, assets under management and performance have all taken a dive amidst the market crisis.

The firm’s assets under management have plummeted precipitously since peaking two years ago at ¥2 trillion (US$20.4 billion). Spark said that the figure was ¥1.06 trillion (US$10.8 billion) at the end of September, and fell to ¥839.1 billion (US$8.6 billion) in October.

Sparx reported a ¥1.15 billion (US$11.6 million) fiscal first-half loss, as revenue plummeted 48% to ¥6.7 billion (US$68.5 million) in the six months ended Sept. 30. Last year, the firm posted a ¥113 million (US$1.2 million)profit. Management fees fell 28% to ¥6.1 billion (US$62.4 million) and performance fees collapsed by 73%, with Sparx earning just ¥1.2 billion (US$12.3 million) in incentives. Source

Resource #6:
(11.5.08) A flagship SPARX Group hedge fund continues to rack up big numbers as many of its peers do exactly the opposite.

Hong Kong-based PMA said today that its Harvester Fund rose another 4.83% last month. The foreign exchange and macro fund is now up 21.33% year-to-date.

“Given that we anticipate that market conditions will remain difficult in the near-term, our strategy will be to remain light and nimble in our positions,” Shun Hong Liu, macro strategy chief investment officer at PMA, said. “There are many landmines in the markets at the moment, with the full impact of the unwinding of structured products, potential pension underfunding and a resulting downward stock market pressure as yet unknown.” Source

Resource #7 (2.28.08) Shuhei Abe, a disciple of George Soros, looks for Japanese companies that are heading to developing neighbors.

Walk into a South Korean convenience store and you might think you're in Japan. You'll see refrigerator cases lined with a Japanese treat: seaweed-wrapped rice cakes called onigiri. The only difference is that in Japan the snacks are stuffed with salmon or pickled plum, and in Korea you get spicy kimchi or barbequed pork.

To investor Shuhei Abe, the migration of Japanese food to Korea reveals how similar Asian tastes are--and how much opportunity exists for Japanese companies in saturated domestic markets to move out into Asia.

When Abe began watching Japanese stocks, in the early 1980s, the country's economy was easy to understand: "U.S. to consume, Japan to produce," he recalls. As a junior equities analyst at Nomura, the Japanese bank, he followed VCR makers like Matsushita and Sharp. Abe, now chief executive of the $13 billion Tokyo money-management firm he founded, Sparx Group, has been making money from foreign trade ever since. source

Resource #8 (10.3.03) Shuhei Abe, founder, President and CEO of SPARX Asset Management Company Ltd. presented his best case for imminent, radical, market-driven economic change in Japan.

As a young professional living in the U.S. from 1981 to 1988, Mr. Abe observed finance professionals struggling against the market to prove their worth. He came to understand how "under the rule of capitalism, the market is placed above all else." But when he returned to Japan in 1989, he found many Japanese felt the market was something to be controlled or manipulated. It took a loss of 80 percent of the stock market's value for Japanese to understand what a market is.

The rationale for Mr. Abe's asset management concept, SPARX, is that Japan is changing from a bureaucratically controlled system to a market-driven system, Mr. Abe said. Change is taking place under Prime Minister Koizumi's policy of squeezing the economy beyond the point where other prime ministers have relented. As a result, the Japan premium has disappeared. By all measures, Japan is cheap, and foreign investors are buying. Corporate Japan is now out of the hands of cross-shareholders, who really do not care how corporations perform, and into the hands of shareholders who really care about the performance of the companies, Mr. Abe stated. Banks now have very little say in the affairs of their borrowers because they are only 30 percent of total lenders to Japanese firms--the biggest change Japan has experienced in the past four decades. source

Resource #9 (9.17.07) Shuhei Abe is one fund manager who bristles at being called an activist. That's because the founder and chief executive of Japan's Sparx Group (SRXXF ) doesn't advocate publicly airing complaints about the management of poor-performing Japanese companies.

Instead, Abe prefers subtlety. After Sparx invested more than $100 million to become the biggest shareholder of camera and medical equipment maker Pentax in 2005, Abe spent the next two years suggesting that the company consider a merger with a stronger rival. "My position was very clear from the beginning—that is, they may survive one, two, or three years, but looking 10 years ahead there is no way" Pentax can survive on its own, says Abe. By May, 2007, Pentax had agreed to an $815 million takeover offer from high-tech glassmaker Hoya.

Abe's low-key approach is paying off in other ways as well. The equity fund he started with a staff of five back in 1989 ranks 11th in this year's Asia BusinessWeek 50. That's a satisfying turn of events for Abe, who got into the market as stocks soared to their all-time highs—and then took a beating when they plummeted back to earth. It's also good publicity for Sparx as Abe caters to rich global clients and broadens the fund's reach in other parts of Asia with the aim of tripling its holdings by the 2010 fiscal year. source

Resource #10 (3.3.08) Tokyo based SPARX Group held on to the title of Asia's largest indigenous hedge fund management company in 2007 (see the ASIA25 on The Hedge Fund Journal website). But only just. The last 18 months have been tough for Japanese equity hedge funds, and the SPARX version suffered along with most in the strategy. That SPARX remained the Asian-based manager with the most hedge fund assets held was a testament to the strategy of expansion and diversification devised by President, CEO, and CIO Shuhei Abe.

In the universe of Asian dedicated hedge funds only the likes of Michael Sofaer and Sloane Robinson have been around longer, and both of those long-tenured managers of hedge funds are based outside of Asia. SPARX Group was founded in Tokyo in 1989 and the SPARX Long/Short Fund was launched in June of 1997. At that time the only local hedge fund operations were those of Tiger and Soros Fund Management, and the offices could only offer 'research services' to the parent companies in New York as decision-making had to be done offshore. source

Resource #11 (3.8.04) Early last year, Japanese bank stocks resembled those goblin-like orc creatures in The Lord of the Rings film trilogy. Investors feared and loathed them. A severe market swoon -- the Nikkei stock index touched a 20-year low of about 7,800 last April -- had so badly damaged the capital bases of the major money-center banks in Tokyo that there was serious question whether they would ever recover.

In May, Resona Holdings Inc. (DWAGF), Japan's fifth-largest banking group, with $360 billion in assets, announced that it needed a $17 billion cash infusion from the government to stay above water. It was then nationalized. Little wonder that by June, bank stocks had cratered 35% over 12 months. source

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