AIJ client to pursue compensation

Bloomberg

Human Holdings Co., the school and health care company that has plunged 10 percent since disclosing it was a client of suspended AIJ Investment Advisors Co., pledged to seek compensation for losses from the asset manager.

Human Holdings is speaking with its lawyers to see if it can claim damages for possible losses on the ¥330 million that AIJ managed for the company as of Dec. 31, Yusuke Kawashita, an executive officer, said in an interview.

The Financial Services Agency suspended AIJ for a month on Feb. 24 while it finds out what happened to the more than $2 billion in assets managed by the firm. The impact on net income from any losses on Human Holdings’ investment won’t exceed ¥330 million, Kawashita said, without specifying an amount or when it would book any charge.

“We find it very regrettable that the reported performance was unrealistic and untrue,” Kawashita said Thursday. “We are now in discussions on how to legally claim as much compensation as possible.”

Phone calls to AIJ on Thursday reached an automated recording that didn’t take messages.

Human Holdings was founded in 2002 and started investing money through AIJ that year, Kawashita said. The company is one of the few Japanese clients of AIJ that didn’t invest pension assets. All except two of AIJ’s 120 domestic contracts were with pension funds as of Dec. 31, 2010, according to a regulatory filing submitted by the fund manager last March.

In February, Human forecast net income will more than double to ¥692 million for the year ending March 31, on ¥50.9 billion of revenue. The company, which has about 2,000 employees and 15 subsidiaries in Japan and abroad, listed on the Jasdaq exchange in 2004.

Kawashita said Human may pursue legal action once the Securities and Exchange Surveillance Commission, the FSA’s investigative arm, finishes inspecting AIJ.

The regulator may extend its one-month suspension as investigations into the asset manager expand to Hong Kong, two government officials said.

Japanese authorities called on their Hong Kong counterparts to help find out what happened to the ¥185.3 billion in assets managed by AIJ and determine any wrongdoing, one of the officials said.

Tokyo-based AIJ told regulators its assets under management have dwindled to about ¥24 billion, including ¥4 billion in cash and deposits, one of the officials said.

More for hedge funds

The pension fund of a Hitachi Ltd. unit plans to double its hedge fund allocation and pare domestic equities to boost returns even as the suspension of AIJ Investment Advisors Co. may slow money into alternative assets.

The retirement fund of Hitachi Kokusai Electric Inc., a unit of the nation’s second-largest manufacturer, plans to invest about 15 percent of its assets in hedge funds in the fiscal year starting April 1, up from the current 8 percent, said Kazuaki Sakura, the fund’s adviser. The pension manages ¥24 billion and has a 3.5 percent return target, he said, adding it hasn’t invested in AIJ.

Japanese pensions are under pressure to expand their investments beyond stocks and bonds for higher returns to fund benefits in the world’s fastest-aging society. AIJ was suspended on Feb. 24 by regulators after it couldn’t account for the bulk of the ¥185.3 billion it managed for clients, including pension plans, as of March 2011.

“To judge that all alternative investments equal high risk is wrong,” Sakura said Wednesday in Tokyo, referring to the latest inquiry into AIJ. “We will do proper due diligence on the strategies. There are investments that have lower risks than equities.”

Japanese pensions including those representing unions were among clients that had money with AIJ, which has yet to be accused of wrongdoing. Advantest Corp., a maker of memory-chip testers, and Yaskawa Electric Corp., an industrial robot maker, are among corporate pension plans that entrusted money to AIJ, which said it used hedge fund strategies to trade.

Hitachi’s pension fund plans to reduce its holdings of domestic stocks to 26 percent from 42 percent in the new business year, Sakura said. Private equity investments, currently categorized under stocks, made up 2 percent of its assets, he said. That will triple to 6 percent and fall under the alternative investment category, he said.

Domestic bonds will rise to 39 percent from 35 percent in the next fiscal year, while overseas debt holdings will be cut to 12 percent from 13 percent, he said.