Photo: Christian Haugen via Flickr
Goldman Sachs is probably wishing they didn’t let this one go: the 33-year old trader Yukihiro Sugihara just led his Tokyo-based hedge fund Hayate Investment Co. to a nice 27% return, according to Bloomberg. He says he did it “by filling a gap in Japan´s credit markets with loan guarantees to companies that can´t get funding.”
Hayate isn’t a big fund — it has only $36 million AUM.
Sugihara worked as a prop trader at Goldman before moving to Japan’s Tower Investment Management as an analyst. He launched Hayate in 2006.
For this particular fund, Credit Investment I, which he launced in 2009, he’s been working with a unit of Itochu Corp (Japan´s fourth-largest trading company), to insure that bills owed to more than 3,000 small businesses get paid.
Even though the default rate for small to midsized firms in Japan is low — 0.25% — those firms received loans averaging only 16 million yen in Q4 (less than $1 million USD), versus the larger companies, which got 3.2 billion yen (about $39 million) in loans over the same period.
Sugihara told Bloomberg:
It´s an optimal time for us to profit from the ga between what Hayate charges companies for insurance and the amount that it has paid for the three or four companies that have defaulted since the fund started. Credit costs as well as default risks are coming down, meaning the spread for returns is widening
In his other portfolios, Sugihara finds small companies that have not been the subject of a lot of research by brokerages yet, and are traded primarily by individual investors.
Two companies he’s made a lot of money on include Taiko Pharmaceutical, which makes a drug for diarrhoea medication and which owns a patent for a disinfectant product that could help against swine flu, and Foster, an earphone maker. When Sugihara found out Foster would be supplying Apple iPods and iPhones with earphones, he invested in heavily. Foster stock has since surged.