Sparx eyes up to $100 million new Japan reconstruction fund

TOKYO Mon Jun 20, 2011 7:56am EDT

SPARX Group Co. President and Chief Executive Officer Shuhei Abe speaks during the Reuters Rebuilding Japan Summit in Tokyo June 20, 2011. REUTERS/Toru Hanai

SPARX Group Co. President and Chief Executive Officer Shuhei Abe speaks during the Reuters Rebuilding Japan Summit in Tokyo June 20, 2011.

Credit: Reuters/Toru Hanai

TOKYO (Reuters) - Japanese money manager Sparx Group 8739.OS will raise up to $100 million over the next year in a new real estate fund to invest in companies building temporary hotels in areas hit by the March 11 earthquake and tsunami, the firm's founder said on Monday.

The fund, which will aim for returns of more than 15 percent, will be launched next month and start with about $5 million to $10 million, Shuhei Abe, Sparx's president and chief executive, told the Reuters Rebuilding Japan Summit in Tokyo.

"There will be an absolute supply and demand gap created in the region," Abe said.

"People need houses and need storage space and those are not supplied. That situation should continue for a while," the Harvard-educated fund executive said. He estimated that more than 100,000 people were still homeless in the quake-hit area, which requires massive manpower to rebuild the infrastructure.

When reconstruction starts, workers will need accommodations, which are currently in very short supply, creating an investment opportunity that could earn double-digit returns.

He said this was a good way to benefit from reconstruction opportunities and offer a "quite impressive commercial return" to investors.

Sparx, the only listed asset manager in Japan, also plans to launch mutual fund operations in South Korea, Asia's fourth-biggest fund market, by the end of 2011 or early 2012.

"We have finished applying for our mutual fund license in Korea. We expect the approval to be made relatively soon, then the Korean part of the business can have different sources of capital and also outside of Korea," he added.

Abe said he expected assets under management at its South Korean unit Cosmo Investment Management to grow by as much as around $1 billion in the next year. Cosmo manages about $4 billion now.

Sparx, one of Asia's biggest home-grown hedge fund firms, managed about 658 billion yen ($8.2 billion) of assets at the end of May.

Abe said he expected assets under management to grow by more than 15 percent to about $9.5 billion over the next 12 months, in line with growth seen for major hedge funds in the region as Western investors return to bet on Asia.

Asian hedge funds manage about $150 billion, still roughly $40 billion short of their peak achieved in December 2007, according to industry tracker AsiaHedge.

However, interest in regional hedge funds is staging a comeback with Asian funds witnessing 12 consecutive months of net positive asset flows after a recovery last year, according to data from Singapore-based Eurekahedge.

Asian hedge funds added $20 billion to their assets in 2010, backed by positive returns and accelerated flows in the second half of the year as investors returned to bet on the fast-growing region.

Sparx's alternative assets outside Japan, such as credit, long/short and macro strategies, are managed by PMA Investment Advisors in Hong Kong. The hedge fund's select Korean strategies are managed by Seoul-based Cosmo.

Cosmo accounts for about half the assets of Sparx Group while PMA contributes about $1 billion.

Abe said his firm was in the process of rebranding PMA Investment under Sparx. There is no such plan for Cosmo.

(Reporting by Chikafumi Hodo, Nishant Kumar and Yuka Obayashi; Editing by Chris Gallagher)