March 29, 2011

Warren Buffett: Japan Disaster Presents A ‘Buying Opportunity’

Filed under: Uncategorized — bigcapital @ 3:12 am
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Warren Buffett: Japan Disaster Presents A ‘Buying Opportunity’

in South Korea ( – Billionaire investor Warren Buffett believes Japan’s devastating earthquake is the kind of extraordinary event that creates a buying opportunity for shares in Japanese companies.

Japan, the world’s third-largest economy, has been battling to bring an overheating nuclear plant under control after it was battered by the March 11 earthquake and tsunami that rattled global markets and prompted massive intervention in currency markets by the Group of Seven industrial nations.

‘It will take some time to rebuild, but it will not change the economic future of Japan,’ Buffett said on Monday on a visit to a South Korean factory run by a company owned by one of his funds. ‘If I owned Japanese stocks, I would certainly not be selling them.

‘Frequently, something out of the blue like this, an extraordinary event, really creates a buying opportunity. I have seen that happen in the United States, I have seen that happen around the world. I don’t think Japan will be an exception,’ said the 80-year-old investor, dubbed the ‘Sage of Omaha’ for his successful long-term investment strategy.

Buffett heads Berkshire Hathaway Inc, which has substantial insurance and utility investments globally.

Japan’s Nikkei share average rose 2.7 percent on Friday, buoyed by the G7 support, but still ended the week down around 10 percent, with some $350 billion wiped off share values — the market’s biggest weekly slide since the global financial crisis in 2008. Japanese markets were closed on Monday.

Buffett said Berkshire Hathaway, which at the year-end was sitting on $38 billion of cash equivalent and last week bought U.S. specialty chemicals maker Lubrizol for $9 billion, was looking for more large-scale acquisitions anywhere in the world.

In his annual letter to Berkshire Hathaway shareholders last month, Buffett had said he was looking for more acquisitions.

‘The United States is most likely where we will do something,’ he said at a ground-breaking ceremony for a South Korean factory run by a unit of an Israeli firm owned by his investment vehicle.

Buffett will have yet more money to invest after Goldman Sachs buys back $5 billion of its preferred stock from Berkshire Hathaway, which the fund bought at the height of the global financial crisis.


Buffett, ranked the world’s third-richest man by Forbes this year, said he was also looking to buy entire businesses and large-cap shares in South Korea — where Berkshire is already a leading shareholder in steelmaker POSCO.

He said geopolitical risks associated with North Korea had not curbed his interest in South Korea, Asia’s fourth-largest economy. Berkshire also owns a stake in Chinese car and battery maker BYD.

Buffett did not disclose any holdings in Japan on Monday, and Berkshire Hathaway’s annual report did not show any major investments there. He had been due to visit Japan later this week, but canceled due to the earthquake.

Unlike many foreign fund managers, Buffett, who arrived in the southeastern city of Daegu on Sunday by private jet, won plaudits from ordinary South Koreans.

Sporting gray sweat pants and running shoes, Buffett was greeted by signs reading ‘Mr Buffett: Daegu Loves You.’

Many in this country of nearly 50 million people have bad memories of the 1998 Asian financial crisis when a deal with the International Monetary Fund bailed out the country but at the cost of tens of thousands of jobs.

Some U.S. hedge funds have been branded ‘vultures’ for buying South Korean assets on the cheap in the wake of that crisis.

‘It’s a once in a life-time opportunity. I’m honored to meet such a respected businessman,’ said Seo Hyun-joo, a housewife wearing Korean traditional dress.

Buffett later meets South Korean President Lee Myung-bak in Seoul and heads to India on Tuesday to launch his firm’s insurance selling portal.



December 30, 2010

Hedge Funds Flock Back to Asia

Filed under: Uncategorized — bigcapital @ 9:28 am
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Hedge Funds Flock Back to Asia

HONG KONG — Global hedge fund managers are beefing up their presence in Asia, particularly Hong Kong, in the hope of raising more capital amid a swell of investor interest in the region.

Bloomberg News George Soros, chairman of Soros Fund Management LLC. The hedge-fund firm opened its Hong Kong office in November.

Among the big names hanging out their shingles in Asia are Soros Fund Management LLC, Viking Global Investors and GLG Partners LP. D.E. Shaw recently said a member of its six-person executive committee is moving to Hong Kong and Maverick Capital, Ltd. raised the number of analysts in its Hong Kong office to four in August.

David Gray, head of prime services for UBS AG in the Asia-Pacific region.

The Wall Street JournaL –



HONG KONG—Global hedge fund managers are beefing up their presence in Asia, particularly Hong Kong, in the hope of raising more capital amid a swell of investor interest in the region.

Among the big names hanging out their shingles in Asia are Soros Fund Management LLC, Viking Global Investors and GLG Partners LP. D.E. Shaw recently said a member of its six-person executive committee is moving to Hong Kong and Maverick Capital, Ltd. raised the number of analysts in its Hong Kong office to four in August.

David Gray, head of prime services for UBS AG in the Asia-Pacific region, said he knows of about 10 global groups that are putting stakes in the ground in Asia.”They’ve said, time to get a little serious, because to be credible with investors they need people on the ground,” Mr. Gray said. Prime brokers provide a wide range of services to hedge funds, including helping them set up and trade shares.

Investors allocated a net $19 billion of new capital to the hedge-fund industry globally in the third quarter, the largest inflow since the fourth quarter of 2007, according to industry data providers Hedge Fund Research Inc.

The biggest funds that can invest around the world say part of the reason money is pouring into their coffers again, especially from U.S. pension funds, is because of their increasing exposure to Asia. As a result, they are ramping up staffing in the region. In contrast, smaller funds and funds of funds remain starved of capital.

“We’ve seen a shift internally of allocations towards Asia because we feel you get a better bang for your buck here at present,” said Des Anderson, a partner in Marshall Wace LLP. The London-based, multibillion-dollar fund has about a quarter of its assets invested in Asia. Its Hong Kong office has doubled in size over the past two years to 30 people, Mr. Anderson said.

Buoyant Asian economies are spurring the hedge-fund charge. The International Monetary Fund forecasts Asian economic growth of 8% this year, with China and India leading the wayat 10.5% and 9.7% respectively.

Tax rates are also a factor. Hong Kong and Singapore compare favorably given their relatively low personal income taxes for higher earners. For Hong Kong, the rate is 17%, and in Singapore it is 20%, compared with 50% in Britain

In one sign that hedge funds are eager to bet on China, revenues generated in Hong Kong from lending stock to hedge funds for short selling recently overtook revenues generated in Japan, historically one of the most heavily traded Asian markets. October is the first time this has happened, according to Dataexplorers, an industry service provider.

Hedge funds often sell short one stock at the same time as they buy another, a tactic known in the industry as a pair trade. Chinese-listed companies are more accessible to investors in Hong Kong than on any other exchange.

The industry’s move eastward comes at a time when the industry is under siege in the West. Investigations into insider trading at hedge funds in the U.S. are roiling the industry. Strict new rules on capital and disclosure requirements for hedge funds in the European Union are prompting some to move to places where they may feel more welcome.

“The EU doesn’t seem to particularly like hedge funds—a move to Hong Kong or Singapore would be natural,” said Ian Mukherjee, chief investment officer of London-headquartered Amiya Capital, which has $1.75 billion under management focused on emerging markets.

Hong Kong and Singapore are both eager to court hedge funds to help boost their credentials as regional financial centers, although evidence of any wrongdoing in other jurisdictions could prompt tougher scrutiny of funds’ activities in Asia too.

This isn’t the first time hedge funds have flocked to Asia. Many set up offices in 2006 and 2007, but either closed or severely cut back their Asian operations during the global financial crisis.

That history raises concerns that the current influx of hedge funds represent hot money flowing into a region where veteran investors are needed to eke out gains. Asia’s markets are relatively shallow compared with those in the U.S. and Europe. Short selling is banned in some places, such as South Korea, and heavily restricted in others, including Australia.

Already, some Asian governments are implementing limited capital controls in order to cope with a flood of money in search of higher yields. Quantitative easing in the U.S. and Japan has speeded up that flow of cash. Capital controls could trip up hedge funds that find themselves unable to exit markets as quickly as they would like during times of turbulence.

Chicago-based Citadel Investment Group LLC ramped up staffing aggressively in Asia during 2005, but closed its Tokyo office and cut jobs in Hong Kong during 2008.

“It feels like we are going back to 2003 where people rushed into the space wanting to spend their money,” said UBS’s Mr. Gray, “but there is not enough people with enough experience of running an Asian portfolio.”

Many hedge funds are also using similar strategies in Asia, which could make it harder for them to make a profit in the region’s less liquid markets. Nearly two thirds of the capital deployed in the region is in long-short strategies, in which funds take long and short positions in stocks at the same time, compared with a third globally.

While big funds are seeing an inflow of money, smaller funds are struggling. In part, that is because big investors such as U.S. pension funds are pouring money directly into large funds, cutting out fund-of-funds middlemen that normally screen start-ups with niche strategies. Globally, funds-of-funds have had net inflows of capital in only two of the last nine quarters, according to HFR.

“Smaller hedge funds are consolidating as they are finding it difficult to raise capital,” said Martin Wheatley, chief executive of Hong Kong’s Securities and Futures Commission. “Bigger hedge funds are benefiting from the environment.”

Making a profit will also be made tougher by rising compliance costs and risk management as regulators beef up oversight of the hedge-fund industry. People in the industry say funds have to make at least $75 million to cover these costs, up from $40 million to $50 million previously


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