Cerberus, Tudor Among Hedge Funds Hit By Japan Losses

Mar 22 2011 | 12:39pm ET

Several high-profile hedge funds took big losses in the wake of the tragic earthquake, tsunami and unfolding nuclear disaster in Japan.

Cerberus Capital Management, Paulson & Co., Tudor Investment Corp. and Sparx Group were among the firms suffering losses as the Japanese stock market swooned. Several hedge funds lost as much or more than Japanese stocks as a whole, which fell 10% on March 15 but have since recovered somewhat.

"Many in the long/short space have suffered 5% to 10% losses," Wolver Hill Asset Management's Ed Rogers told MarketWatch. "We know of one fund that suffered a 40% hit, but that is an extreme outlier."

Wolver Hill's own Japan-focused funds are actually up in March—thanks to its short bets in the country.

Arcus Investment's Japan fund wasn't so lucky: It's Japan Long/Short fund was down 10.9% through the middle of the month. Another Arcus fund, Zensen, was down 7.4%.

The latter is in line with losses suffered by some of the biggest names in the hedge fund industry. Tudor's Momentum fund was down 7.1% through March 15, and Sparx's Long-Short Fund was down 6.5%. Paulson's flagship Advantage Fund was down 6.14% in the first half of the month.

A Cerberus side-pocket may also have taken a bid loss. The Cerberus International liquidating special-purpose vehicle, set up after more than half of the fund's clients demanded their money back at the height of the financial crisis, has a roughly 30% exposure to Japan.

It is unclear how much the Cerberus SPV may have lost, but one of its largest holdings, Aozora Bank, has seen its shares plummet by more than 10% since the earthquake. And at least one investor seeking to buy a stake in the SPV on the secondary market lowered its bid this week, according to MarketWatch.

Another hedge fund entirely quit Japan in the days after the earthquake. Central Asset Management told Reuters that it liquidated it's entire Japan exposure—which had stood at about 15%—following the disaster, which has cost an estimated 20,000 people their lives and caused partial meltdowns at a nuclear power plant.

"When the crisis hit, we reacted quite quickly," CAI's Eddie Tam said. "So within two to three days, we liquidated the entire Japanese exposure. It's not really prudent to guess the outcome of the nuclear incident at this point in time."


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