Legislative action needed to nourish Hawaii’s hedge funds
Hedge funds managed in Hawaii have increased in recent years and are seen as a future focal point for Japanese investors.
Hawaii is emerging as a focal point for Asia's investors in hedge funds, the financial pools that have blossomed in recent years. London's Financial Times reported this week that 10 hedge funds now operate in Honolulu and that figure could soon double, finding a welcome niche in the state's diversifying economy. The growth should be encouraged by increasing security education and cutting red tape in the industry.
Initiated in the United States less than 60 years ago, the investment funds, unlike the more familiar stocks and bonds of mutual funds, are exempt from federal securities laws and charge high fees to professional investors and the wealthy. The $2 trillion industry embraces more than 9,000 hedge funds a year worldwide, estimated to be growing by 20 percent a year.
The Legislature passed a resolution two years ago supporting the growth of Asia-focused fund management. The resolution noted that the industry consumes no valuable natural resources, creates no harmful byproducts and requires no special infrastructure.
According to the Financial Times, Japan's investment managers are tired of their country's "slow and heavy-handed regulators." They are encouraged to move away from Japan for tax reasons but are reluctant to relocate to Singapore or Hong Kong. They are drawn to Hawaii by historical links, ethnic compatibility, comparatively low property prices, English as the main language, the ability of many residents to speak Asian languages, the islands' laid-back lifestyle and, oddly, the 19-hour time difference.
Jason Bellamy, who moved to Hawaii eight years ago as a private banker, told the newspaper that he started Bellamy Fund Management in Honolulu in 2006 and is launching a $25-million Japanese equity fund. When it is 9 a.m. on Monday in Tokyo, it is 1 p.m. Tuesday in Honolulu, allowing fund managers known by Bellamy to surf in the morning and work into the evening dealing with clients in Japan.
The state administration has taken strides to increase education in the industry. Hawaii was recognized two months ago for having the greatest outreach in North America through the investor education program run by Tung Chan, commissioner of securities in the state Department of Commerce and Consumer Affairs.
The Akamai Foundation, which promotes the fund management industry in Hawaii, proposes a five-year Asia- focused program in financial analysis training, beginning with the junior year in high school and continuing through university years. The Legislature's resolution supported such a specialized training and internship program but did nothing to bring it about.
Akamai also plans to ask legislators to streamline the licensing process and provide incentives for firms to relocate to Hawaii.