Japan’s J-Flag Readies Small-Cap Hedge Fund

Feb 5 2010 | 1:04pm ET

Buoyed by its success in the space, a young Japanese hedge fund firm is planning a new fund focusing on the country’s small-cap companies.

J-Flag Investment Co., which was founded and launched its first hedge fund in June, plans to employ the deploy the strategy behind its successful debut Simplex J-Flag Absolute Return Fund on Japanese companies with market capitalizations of less than ¥30 billion, Bloomberg News reports. Simplex J-Flag’s investments in small-cap funds helped drive its benchmark-beating performance, returning 8.5% over its first seven months, compared to the 4.5% jump in the Jasdaq Stock Index, which tracks small-cap stocks.

J-Flag founder Hisashi Osezawa, a former fund manager at JPMorgan Chase, said he hopes to launch the new fund in April or May with as much as ¥1 billion (US$11 million). Osezawa acknowledges that the fundraising environment is not exactly favorable, but told Bloomberg that he is in talks with several potential anchor investors of the new offshore vehicle.

“Capital-raising remains tough for start-ups like us, but in terms of performance, it was the best time to enter the market,” he said. “We are slowly starting to see some traction from overseas funds of funds now.”

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