The Plaza Japanese Equity Long Short Fund is a long/short
equities fund that uses a quantitative alpha model to capture
opportunities across a broad universe in the Japanese equity
Interview with Kazuyuki Murai
- How does the Alpha selection model work? Is the stock
selection purely computer driven?
The model seeks to generate consistent Alphas by combining
the use of both long-term indicators (PER, PBR) and short-term
indicators (Return-reversal) in line with market conditions.
The portfolio is constructed through a disciplined process
where outputs from the model calculated by the optimiser
is further analysed against current market conditions
and analysis on portfolio's risk attributes by the fund
manager on a daily basis.
Thus, the fund manager combines the value-based quantitative
model with his judgment on market fundamentals.
It may occasionally be necessary to change the weight
of individual stocks as well as the risk characteristics
of the portfolio.
- How did the recent nationalisation of Ashikaga Bank
Ltd affect your fund?
There was no impact from the nationalisation of Ashikaga
Bank Ltd as we had no exposure to Ashikaga Bank Ltd. In
fact, we had low net exposures to the banking sector in
our portfolio. We try to maintain a low risk profile in
volatile sectors from a risk management perspective.
How are you finding the sourcing of short borrowing?
What are the types of yields currently charged?
We source short borrowing using negotiable margin transactions
with brokers. The level ranges from 45-100bp per transaction.
We systematically review our brokers to try to maintain
our fee below 50bp on average. In addition to the level
of lending fees, the turnover rate is managed strictly
to maintain a high information ratio. The fund manager's
qualitative judgement is a key element in controlling
the overall turnover rate of the portfolio.
- Do you foresee any government intervention that would
curtail your ability to short-sell?
I do not foresee any government intervention in the
near future. The portfolio will not be much influenced
by such intervention, as the portfolio is not only highly
diversified but also has a wide range of stock holdings.
- What sectors does your model see out performing in
I see that the chemical sector will outperform in 2004.
The underperforming sector may be the machinery sector.
The lack of liquidity was a major problem for a number
of Japan only hedge funds earlier this year. Is this still
We currently do not have liquidity concerns in managing
the fund. Our fund is extremely diversified and has about
300 stocks on each side.
- Currently what are the main obstacles for starting
a new hedge fund in Japan and does the government have plans
to relax the regulations in 2004?
The following are some of the examples viewed as obstacles
for a start-up fund in Japan:
- High regulatory requirements - minimum required capital,
reporting and staffing requirements
- Leverage is limited
- Limit on types of transactions
Singapore and Hong Kong in particular have been very aggressive
in promoting and supporting the fund management business.
Japan will relax some its rules. Unfortunately, it will
not be as competitive as Singapore or Hong Kong.
Great growth can be expected in Japan in alternative
investments both from an investor as well as a fund manager's
perspective. We believe we are in an excellent position
to be part of this growth.
PLAZA ASSET MANAGEMENT Co., Ltd.
+81 3 5770 2300