The AlphaWeek and Sussex Partners Japan Hedge Fund Industry Survey, 2024 Edition
Welcome to the 2024 edition of the AlphaWeek and Sussex Partners Japan Hedge Fund Industry Survey.
This year’s edition is the fifth iteration, and it continues to grow in terms of participation. This year, 28 managers completed the survey, the largest number of participants to date, and we are grateful to those who took the time to complete this year’s survey.
The macroeconomic headline in Japan in 2023 was, of course, the TOPIX ending its 30-odd year drawdown. Public equity market performance is notable in the Japanese market due to equities being, by far, the largest underlying exposure of the funds that comprise the industry, and Patrick Ghali, Managing Partner at Sussex Partners, co-producer of this report, has some interesting observations about how Japanese hedge funds compared against the TOPIX – and why – in his annual Japanese Hedge Funds Review And Outlook article for this report.
The inflation rate in Japan crept up over 4% at the beginning of the year, something that hadn’t been observed since 2014, but has since been on a downward trend, mirroring the trend of other developed economies. On December 19th, the Bank of Japan left its benchmark interest rate negative at -0.1%, a widely expected decision, as it continues to try and encourage lending and borrowing. But, while that might seem like a fairly stable macroeconomic environment, in terms of the equity market, the aforementioned rally was driven by a small number of stocks, similar to what was observed in the USA, so the equity waters were more choppy generally than what might appear on the surface.
Some results in our survey are rarely a surprise. Japanese hedge fund managers continue to be strongly of the opinion that global investors don’t pay them enough attention (82.14%) and this year, it’s even worse for domestic investors, with 96.43% of survey respondents saying that local capital doesn’t give them much of a look in.
Other results are more notable. 57% of respondents this year don’t consider ESG when entering into a position, a reverse from last year, and perhaps indicative of the broader pull back in ESG more generally. And a strong majority think that both the Japanese Stewardship Code and the Corporate Governance Code (85.71% and 89.29% respectively) have been a benefit to their strategies.
Last year, there was something of a blip in confidence, as ‘only’ 82% of survey respondents were bullish about their opportunities for alpha generation in the coming 12-24 months. Those naysayers are no more, as 100% of survey respondents said they were bullish when questioned this year. It will be interesting to see whether or not 2024 proves them right.
I hope you enjoy reading the 2024 edition of the AlphaWeek and Sussex Partners Japan Hedge Fund Industry Survey; click the link below to download this year's report.
Greg Winterton
Founder, Managing Editor
AlphaWeek
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