Teneo Partners, a Tokyo-based consultancy that services managers and investors in Japan's alternative investment industry, is looking to extend its reach by applying for a new licence giving it unlimited access to Japanese investors. Teneo is currently applying for a Securities Sales Agency license from the Financial Services Agency to directly distribute prospectuses and subscription forms to Japanese investors on behalf of hedge funds.
"The new license is a very powerful tool, which will allow us to take our advisory business to a new level," explains Teneo partner Mark Voumard. "We'll be able to solicit investors directly and will effectively have the same rights as a securities company."
The Securities Sales Agency system is a recent amendment to Japan's Securities and Exchange Law and is an attempt to increase the number of intermediaries in the nation's market. The applicant needs to be sponsored by a registered securities firm. Teneo declined to name its sponsor other than to say it is foreign.
Teneo believes that the new license, if approved, will give the firm an edge over the other hedge fund marketers operating in the Japanese space, the bulk of which are unlicensed and take an 'under the radar screen' approach.
"Japanese institutions are becoming increasingly uncomfortable dealing with agents which aren't domestically licensed," explains Voumard. "The regulators are beginning to adopt a sterner approach to such groups.
"According to some estimates there are about 100 alternative investment groups based in Japan that run illegal marketing operations, as well as countless fly-in-and-fly-out marketers who are technically breaking the Securities Exchange law."
With institutional and individual investors increasing their allocation to alternatives, the regulators have heightened their scrutiny of the industry.
"The FSA recently published a list for the first time of several unlicensed entities marketing investment products in Japan," he adds. "Although this was mainly targeted at the retail marketers, it's only a matter of time before the regulators crack down on those doing the same at the institutional level."
Teneo, which was set up last year, has three founding partners who are all independent marketers with long-established relationships with Japanese institutions.
Voumard, who has lived in Japan for the past 20 years, was most recently head of marketing at KBC Securities in Japan. His partners Thomas Carrick and Richard Okuno were both born and raised in Japan. Carrick spent over 13 years at various positions within Westpac in Tokyo and Sydney and Okuno has worked globally with Morgan Stanely, Salomon Brothers and Franklin Templeton.
In addition to assisting offshore funds raise money from institutional investors in Japan, Teneo also helps firms looking to manage assets in Japan create tax and regulatory advantaged structures. The team has begun providing research on Japanese listed companies, and has established a programme to help start-up managers with operations, administration and marketing.
Vourmard expects the number of hedge funds run by Japanese nationals to increase dramatically over time as locals begin to see their peers create successful businesses, and pension fund demand for onshore local hedge funds increases.