US law firm Bingham McCutchen has poached a seven-strong funds team in Tokyo from rival White & Case, highlighting the former's plans to build out its investment funds practice in the region, with China next on the list.
It is thought that White & Case's entire Japan funds team has exited, but the firm declined to confirm this. The departures include partners Christopher Wells and Tomoko Fuminaga, and five other lawyers including Carol Tsuchida and Koji Yamamoto.
Wells’ team is said to have been the biggest and arguably the most successful in White & Case’s funds practice in the region. As a result, its departure would seem to be a major blow for the Asia funds practice as a whole. This followed the exit of partner Tom LaMacchia to join Qatar's sovereign wealth fund in October.
Market sources say White & Case is likely to close its investment funds practice in Japan, rather than seeking to rebuild it virtually from scratch.
A spokeswoman for White & Case declined to comment apart from to say: “Our Asian funds practice is strong and has helped clients raise over $6 billion outside Japan in the last two years. Working closely with our colleagues in our global funds practice, our Asia funds team will continue to meet the needs of our clients in Tokyo and across Asia.”
However, it is said that Wells’ team had operated largely independently from the rest of the regional and global funds teams. Hence it might be difficult for White & Case to continue to support those clients with staff from other offices on a prolonged basis, suggest sources.
Meanwhile, the hiring of Wells and his team reflects Bingham's aggressive buildup in and focus on the Japanese market, say sources.
Bingham is expected to continue to work on regulatory licensing and registering feeder funds for Japanese investors looking to invest abroad. The firm will target hedge funds looking to set up in the country with a view to helping them to manage and put on trades quickly.
Wells says he expects to see more requests from offshore fund managers who are looking again at obtaining a discretionary investment management [DIM] licence in Japan, allowing them to make onshore investment decisions.
“Over the past decade we closed a number of DIMs because of lack of interest and low activity in the Japanese equity market, and because many managers didn’t like the Japan story,” he tells AsianInvestor.
“But that has changed now because of the major profits managers have achieved over the past eight months," notes Wells. "All of a sudden everyone is very interested in having a Japan base. We have had a lot of inquiries about how to get a discretionary management licence.”
The Japanese market has been benefiting from the 'three arrows' policy under new Japanese prime minister Shinzo Abe that employs aggressive monetary easing, fiscal stimulus and other measures to boost economic growth. The recent stock market rally has sparked major foreign and domestic investor inflows.
Additionally, following the arrest of the president of AIJ Investment Advisors Kazuhiko Asakawa for defrauding ¥109 billion ($1.4 billion) of missing pension funds last December, fund houses in Japan are readying for a rise in the number of regulatory inspections and a tightening of laws.
This has meant Wells and his team have seen a greater number of enquires on insider trading and advising clients on how to prepare for regulatory inspections. It has also been fielding a lot of “real time” questions by phone about trading situations and whether certain fact scenarios could fall under the insider trading regulations.
And with Wells’ move to Bingham, he will also see his remit grow gradually to the Chinese market, where he hopes to create a fund regulatory practice in the mainland originally in Beijing and possibly elsewhere in the coming few years.
“My personal interest in China is in the overall regulatory development of their securities markets, especially for offshore investment funds,” says Wells. “Recent initiatives aim to make China more internationalised and the growth that follows could create a global level trading market.”
Among various initiatives, the China Securities Regulatory Commission has recently run a public consultation (which closed on April 13) as it looks to ease a number of restrictions for its qualified domestic institutional investor (QDII) programme, first launched in 2007 to facilitate offshore investment by domestic institutions.
Bingham plans to roll out advisory services helping Chinese outbound managers looking to manage offshore asset bases using domestic capital both onshore and offshore. It is also looking to work on offshore structures and third-country feeder funds such as Cayman Island structures aimed at Chinese institutional investors and family capital.
“China may develop a lot like the United States in terms of how the hedge fund industry grows,” says Wells. “We think it will develop more from the private [family] capital side than Japan, which is much more based on institutional capital.”