Rockhampton Management Ltd. is shutting its pan-Asia hedge fund to return to its Japan roots.
The 20-year-old asset manager with offices in Tokyo and Hong Kong will shift back to exclusively invest in Japan and cease other Asia trading, Rockhampton Chief Operating Officer Ken Esparza wrote in an email to investors and service providers last week. Daniel Lian, who led non-Japan Asia investments, earlier resigned.
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Global investors are gravitating toward Japan, as its corporate governance reforms gather steam while geopolitical tensions and regulatory uncertainties sully enthusiasm for China. Warren Buffett said he favored deploying capital in Japan over Taiwan. Citadel’s hedge fund business is returning to Tokyo after shutting its office there more than a decade ago.
“Japan in 2023 is faced with a starkly different reality to 20 years ago, or even two years ago, for that matter,” Esparza wrote in the email. “The government is at its most aggressive in attempting to instill change across businesses and society.”
Rockhampton was established in 2003 by Eric Forday, a founder earlier of Japan Advisory Ltd., which had helped manage the Whitney Group’s Japanese long-short products. Forday has been a Japan stock fund manager for 26 years, including 23 years overseeing a hedge fund, according to Esparza.
The Japan-focused Rockhampton Fund returned an annualized 9.2% from its inception on July 10, 2003, through March 2021, according to a fund summary that year. That beat the 6.4% dollar gain of the Topix Index in the same period.
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The firm expanded into non-Japan Asia investments in 2011. Lian joined in 2016 from Baring Asset Management as a regional commodities analyst, rising to become portfolio manager of the non-Japan Asia strategy in January 2018.
In October 2018, the firm spun the non-Japan Asia strategy into a standalone fund, known initially as the Rockhampton Asia ex-Japan Fund and later renamed the Rockhamption Pan-Asia Fund. Lian hired five analysts for the team.
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The fund, backed by Rockhampton internal capital, failed to raise much from outside investors in its more than four years, Esparza said in a separate response to a Bloomberg News query. Capital raising by Asia-based funds has hit snags over the past three years as the pandemic grounded travel while geopolitical friction and rising interest rates made investors more cautious.
Esparza declined to share the amount of assets overseen by the firm, beyond saying the closure of the non-Japan Asia strategy has had minimal impact, given it was mostly backed by internal capital. He didn’t share performance numbers for either fund.
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The world’s third-largest stock market, Japan was where some of Asia’s longest-serving hedge fund managers, including Oasis Management Co.’s Seth Fischer, earned their stripes. One of the most liquid in the region, it has been known as an ATM at times when investors need to cash in on international investments. Yet deflation and questionable corporate governance curtailed returns in the past two decades.
Japan has regained the spotlight this year, helping the Topix reach a 33-year high earlier this month. Esparza cited attempts to force through wage hikes and build support for increased defense spending after decades of postwar pacifism. The return of meaningful inflation for the first time in decades is forcing people to change their mindset. The Tokyo Stock Exchange is pushing for companies to improve long-depressed stock valuations.
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While investors renewed interest in Japan in two previous periods under then-prime ministers Shinzo Abe and Junichiro Koizumi, this time a sense of urgency has emerged among corporations with business leaders fearing being left behind, Esparza said.
“For the first time in many years, the Japan ‘game’ is actually being played in Japan, and the crowd is starting to assemble,” he said.
