Myriad closes Japan hedge fund as Abenomics disappoints

Myriad Asset Management has closed down a Japan-focused hedge fund less than a year after opening it, after changing its view on the government’s ability to end deflation through stimulus, said a person with knowledge of the matter.

Myriad started the Japan Reflation Fund in March 2015 to tap opportunities arising from the nation’s efforts to spur growth. The Hong Kong-based firm liquidated the pool, which managed $420 million at its peak, around the end of last year and returned the capital to investors, said the person, who asked not to be identified as the information is private.

Global investors such as BlackRock Inc. have ended bullish calls on Japan as Prime Minister Shinzo Abe’s growth measures faltered, economic indicators deteriorated, stimulus from the Bank of Japan backfired and the yen’s surge pressured exporters. The Topix index is down almost 16 percent this year through May 4, the fourth-worst performing primary stock gauge tracked by Bloomberg globally in local currency terms. Foreign investors were net sellers of Japanese equities for the first 13 weeks of 2016.

The Myriad Japan Reflation Fund invested in assets including stocks, equity indexes, interest rates and currency instruments whose valuations were expected to be tied to the country’s exit from deflation. The fund lost money because of its leveraged view on Japan’s reflation theme, the person said, without giving details. Leverage, or the use of borrowed capital, can amplify gains or losses in hedge funds.

A Myriad representative declined to comment on the Japan fund’s closing.

Led by Carl Huttenlocher, a former head of Asia at Highbridge Capital Management, Myriad held investments related to a broad-based economic stimulus in Japan in the flagship Myriad Opportunities Master Fund, which opened to investors in December 2011. It created the dedicated Japan fund to make bigger, more concentrated bets on the nation’s reflation campaign over an expected time span of two to four years, a person with knowledge of the matter said at the time.

LGT Capital Partners, a Switzerland-based asset manager, said in early April that it had retired its “Japan’s Resurgence” strategy, citing waning optimism that Abe’s attempts to spur inflation will succeed. It also cut the outlook on Japan equities to neutral from overweight.

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