Sitting in his Tokyo office, Edward Rogers bellows with
laughter. In the five difficult years since he launched his own
fund-of-hedge-funds firm, the CEO and CIO of Rogers Investment
Advisors has kept his sense of humor.
Although some might question the sanity of opening a hedge
fund business in Japan, Rogerss good cheer and
persistence in rough markets have paid off. As of September 30
the $100 million Wolver Hill Japan Multi-Strategy Offshore
Fund he advises had gained an annualized 2.4 percent since its
October 2006 inception. The Tokyo Price Index fell 14.4 percent
during the same stretch, while the Eurekahedge Japan Hedge Fund
Index rose just 0.7 percent.
Rogers, 46, beat the indexes with one quarter the volatility
of the Topix. Hedge funds are absolutely the smartest way
quite possibly the only sensible way to invest in
Japanese public equities, he says. We have allowed
our investors to sleep well at night.
The same cant necessarily be said for Washington
native Rogers, who first came to Japan in 1987 and has lived
there on and off for 17 years. Things havent turned out
the way he hoped in 2006, when he quit his job as Deutsche
Banks head of Japanese prime services sales to go solo.
His plan was to raise $500 million, mainly from U.S.
investors, for a Japan fund. But amid rumors that Japan Inc.
was headed for a fall, he only managed to cobble together
Rogers Investment Advisors has since boosted its advisory
assets to some $140 million, with almost $40 million
committed to a new all-Asia fund that Rogers is pitching
globally. The firm has grown from a two-person start-up to an
11-person company with offices in Tokyo and New York, where
Rogers-owned Wolver Hill Advisors officially does all the
trading for the Japan Multi-Strategy fund.
When it comes to trades, theres little doubt that
Rogerss Tokyo team calls the shots. But this overseas
setup speaks to the challenges of running money in Japan
even for Rogers, a Japanese speaker who got to know the hedge
fund fraternity well during his half decade at Deutsche Bank.
Unlike Hong Kong and Singapore, his adopted country
doesnt smile upon hedge funds. Japan is the hardest
place in the world to do business, says Christopher
Wells, a partner with law firm White & Case in Tokyo, where
he heads the local chapter of the Alternative Investment
Rogers, who has a BA in history from Princeton University
and an MBA from Georgetown University, counters that Japan
rewards skilled managers. Besides, the local competition is
dwindling. Rory Kennedy, COO of Rogers Investment Advisors,
says the firm has about 75 rivals in the Asian
fund-of-hedge-funds space, but most of the Japan-based shops
have long since left the country. They could not hack it
here; we can, Kennedy scoffs. He and Rogers stayed put
after the March earthquake, when many other Western executives
and their families bolted.
The firm employs a mix of Japanese and foreign talent. A
former Deutsche colleague, Kennedy reunited with Rogers from
Tokyo hedge fund platform United Managers Japan, where he
served as COO. Yoshiaki Iizuka, head of Japanese research, was
previously CIO of Tokyo-based Traders Investment Management.
Rogerss past includes two years at Merrill Lynch &
Co.s London proprietary trading desk before he joined
Deutsches Tokyo office in 2001.
The Japan Multi-Strategy fund currently invests in 14 hedge
funds with strategies ranging from equity long-short and
statistical arbitrage to activist and credit. As the
worlds second-largest developed economy, Japan offers
hedge fund managers the widest and deepest opportunity set in
Asia, Rogers says: This allows us to create a truly
diversified portfolio with consistently lower volatility than
most hedge funds and all long-only indices have
Rogers has just one conspicuous Japanese investor, a large
institution for which he manages about $80 million. But
hes noticed that Japanese pension funds are moving toward
hedge fund investments for active equity exposure, just as
their U.S. counterparts started doing a few years ago.
Rogers and Kennedy credit their performance to due diligence
the CEO compares himself to statistics-driven Oakland
Athletics general manager Billy Beane, played by Brad Pitt in
the recent movie Moneyball. Rogers and his team have checked
out more than 400 funds in Asia, spending ten to 20 hours at
each managers office.
In the years ahead Rogers wants to grow the Japan
Multi-Strategy fund to $500 million. Hes set a
target of at least $125 million for the new Wolver Hill
Asia Emerging Manager Fund. Having won commitments from the
U.S. and the Middle East, hes talking to South Korean and
Japanese institutional and sovereign investors.
Months like August, when his flagship fund was down only 1.5
percent while the Topix plunged almost 12 percent, keep Rogers
laughing. So many investors regret missing the opportunity to
make a 50 percent profit, he says: What they dont
understand is that the most important thing is to
miss the opportunity to lose a fortune.