Bloomberg
AIJ Suspension Undermines Japan Pensions Hedge Fund
Appetite
By Tomoko Yamazaki and Komaki
Ito
February 26, 2012, 11:10 AM EST
Feb. 27 (Bloomberg) -- The
suspension of AIJ Investment Advisors Co.’s operations amid concerns hedge funds
it manages had lost pension money may undermine plans by Japan’s retirement
funds to boost returns to meet demand in an aging society.
The Financial
Services Agency on Feb. 24 ordered the Tokyo- based firm with 183.2 billion yen
($2.3 billion) of client money to stop business for a month as the regulator
investigates “possible losses” at AIJ’s hedge funds. The FSA also will undertake
a nationwide probe of 263 asset managers.
“If the funds actually suffered
losses, this could potentially have a massive impact on pension plans that
actually invested with them,” said Taro Ogai, who oversees consulting for
pension fund investments at Towers Watson in Tokyo. “Pensions already face
difficulties. At a time when they are trying to boost returns and cut risks,
investing in hedge funds may become difficult for them.”
The inquiry is a
setback for Japan’s pension industry that has been looking to diversify away
from bonds and equities into alternatives investments, including hedge funds, to
maintain steady returns and fund retiree benefits in a country with the world’s
fastest-growing aging society and two decades of slumping
markets...
Regulators have been investigating AIJ, which invests in
futures and options of equities and bonds, since the end of January, and
discovered that the company has been unable to explain to investors the
current state of the way their money is being managed, according to the
FSA...
AIJ’s funds have been traced from Japan to the Cayman Islands,
followed by a trust bank in Bermuda and ultimately to “a major European Bank” in
Hong Kong, the Asahi newspaper said Feb. 25, citing an investigation by
Japan’s Securities and Exchange Surveillance Commission. AIJ kept money-flow
records up to the unidentified bank in Hong Kong and no further records have
been found, the newspaper said...
AIJ may have lost most of the 200
billion yen it manages for companies’ pension plans, the Nikkei newspaper
reported Feb. 24, citing unidentified securities investigators...
Japan’s
financial regulator is also planning to investigate trust banks that handle
pension money as well as corporate pensions, the Nikkei newspaper reported over
the weekend. The regulator penalized at least 35 financial institutions last
year including Citigroup Inc. and UBS AG for breaching securities rules,
according to its website...
AIJ, led by Kazuhiko Asakawa, was established
in April 1989, and had 120 clients including pension plans with 183.2 billion
yen in assets as of the end of 2010, according to a statement from the FSA. It
has 12 employees. Phone calls to AIJ’s main office were answered by an
automatic recording which didn’t allow messages to be recorded. Asakawa was
a former employee at Nomura Holdings Inc., according to a person familiar with
his employment. Keiko Sugai, a Tokyo-based spokeswoman at Nomura, declined to
comment...
AIJ’s fund was ranked top among pension funds in 2008, said
Fujio Nakatsuka, a spokesman at Rating & Investment Information Inc. in
Tokyo. He said the rankings were based on responses from pensions and not what
R&I had recommended to investors