Goldman scales down prime brokerage business in Japan: sources

TOKYO Thu Jul 12, 2012 7:31am EDT

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TOKYO (Reuters) - The head of Goldman Sachs Group Inc's (GS.N) prime brokerage unit in Japan will depart by the end of July as the Wall Street bank scales back that operation, which services hedge funds, and shifts some staff and operations to Hong Kong, sources with knowledge of the matter said on Thursday.

The departure of Toru Okabe underscores the plight of the Japanese hedge fund industry, which is struggling to attract investment into Japan-focused equities funds due to a slump in the local stock market and long-lasting deflation in the economy.

Goldman is Japan's biggest prime broker, with 17 mandates and assets under management totaling $2.7 billion, according to an industry survey by AsiaHedge released in May, which also ranked Goldman as top prime broker in Asia, with 162 mandates and assets under management of $20.6 billion.

Goldman in May transferred its Japanese stock loan desk from Tokyo to Hong Kong, integrating it with a desk handling such loans for other Asian stocks, the sources said.

Staff from the Tokyo stock loan desk were assigned to the prime brokerage team in Hong Kong, which focuses on providing services in loaning stocks, they said.

Goldman said it was reallocating its operation in the prime brokerage business in the region.

"The industry as a whole is operating increasingly on a Pan-Asia basis and we are reallocating our resources to better meet with clients' needs," Hiroko Matsumoto, a spokeswoman at Goldman Sachs Japan, said.

"We are putting more resources into the business across the region and our commitment to our clients including those in Japan remains unchanged," she said.

Okabe joined Goldman in 1997 from Nomura Securities. He has worked in Goldman's prime brokerage section since 2000.

Okabe was appointed managing director of the global securities service section of Goldman Japan in 2004.

Goldman will this year switch the venue for its annual Asian hedge fund conference to Singapore from Tokyo, where it has been held for the past 12 years, the sources said.

Assets managed by Japan-focused hedge funds rose in the first half of the past decade to hit a high of $39 billion in April 2006, according to data from industry tracker Eurekahedge.

They fell to a low of $12.5 billion following the 2008 financial crisis. Japan-focused hedge funds have made a small comeback and managed $16.6 billion at the end of May, the data showed.

(Additional reporting by Nishant Kumar; Editing by Michael Watson and David Holmes)

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