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Japanese Hedge Fund Managers Continue To Feel Shunned By Investors

Japanese hedge fund managers continue to feel shunned by investors, according to the results of a new survey published by AlphaWeek and Sussex Partners.

The AlphaWeek and Sussex Partners Japan Hedge Fund Industry Survey, 2021 Edition, surveyed twenty-two Japanese hedge fund managers about their firms, their funds, their styles and their thoughts. 82% of survey respondents feel that foreign investors don’t pay them enough attention – up from 75% last year – and 77% don’t even think that domestic Japanese investors pay them enough attention.

The findings are surprising.

“For us, Japan remains one of the most interesting opportunities available to hedge fund investors because of Japanese managers’ ability to generate alpha over the long term, especially when compared to global peers” said Patrick Ghali, Managing Partner at institutional hedge fund investment advisory Sussex Partners. “So, it’s interesting to see that Japanese hedge fund managers seem to think that global and local investor interest is getting worse. I do think that having more managers to pick from would help increase interest, and hopefully in the coming years we’ll see more managers coming to market with more products.”

The Japanese hedge fund industry is small in terms of the number of investment managers when compared to the US and the UK but the Tokyo municipal government is trying to give the asset management industry in Japan’s capital a boost, with initiatives such as its Emerging Manager Program providing middle and back office cost subsidies to new managers starting out. Despite these efforts, nearly two-thirds of survey respondents said that they don’t think it’s getting easier for new hedge funds to become registered in Japan.

Despite the small number of managers offering hedge fund products to investors, and the slowness of new products coming to market, Ghali says that the structural idiosyncrasies of the Japanese market means that Japanese hedge funds should continue to provide alpha opportunities for investors.

“Investors globally have a need for alpha-producing investment opportunities,” he said. “And Japanese hedge funds can provide that. We remain bullish on the Japanese hedge fund opportunity.”


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