Japanese Hedge Fund – STB Japan Long – Short Fund I Alpha

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The Japanese equity market gained in June after 2 consecutive months of decline. After the mid-month, the easing concern over the European sovereign crisis and the stagnant production recovery in Japan supported the market, despite slower growth expectati ons of the global economy. Although the QE2 in the US ended as planned, this did not cause stronger bond market due to further risk aversion but, rather, the bond markets were weak. The Japanese equity market was driven by price reversals, in that stagnant stocks due to concern over weak fundamentals had been actually trended higher, and stocks with higher price expectations were profit taken, which was against our investment strategy. TOPIX Total Return Index ended the month at 1078.22, 1.37% higher from the previous month.

This Fund is market neutral and sector neutral. Pair trading is adopted and we create new pairs using original information provided by proprietary analysts’ fundamental research. Through controlling over risks, we aim at capturing absolute return which is not influenced by market fluctuation.

We continued to take positions by taking into account of overall risk of the portfolio and focused on unique factors of individual stocks. The volatility remained at moderate level and we kept the gross exposure at rather high level. We allocated more weights on certain pairs targeting the 1st quarter announcements of FY2011 and, at the same time, we replaced the stocks which priced in the market expectation. The trading activities remained at higher level, similar level as previous month.

As for sectors, we gained returns from long positions of less cyclical subsectors such as measuring instrument or testers within Electric Appliances according to HDD demand. However, defensive stocks in the Machinery sector, such as Pachinko (Gaming) stocks contributed to negative performance, As a result, the monthly return was.

 

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