M&A opportunities and share buy-backs are believed to be ripe in Japan right now with companies trading at low valuations – making for ideal conditions for
M&A opportunities and share buy-backs are believed to be ripe in Japan right now with companies trading at low valuations – making for ideal conditions for managers running event-driven and equity l/s strategies, reported Reuters this week. In a recent newsletter, Hedgeweek reported that Hong Kong-based Nezu Asia had received USD50million in seed capital from Tiger Management, some of which would be going to its Japan-focused Nezu Kuma Fund. Indeed, Japan’s hedge funds, although not as strong performance-wise as the rest of Asia last year (8 per cent versus 10.93 per cent) enjoyed a strong year with respect to startup numbers. Another reason for the interest in Japan, particularly amongst global hedge funds, is the expected increase in pension fund allocations into alternative strategies. Nippon Steel and Sumitomo Metal Industries have already announced plans to merge in October 2012, and with a stronger yen encouraging firms to go in for deals, coupled with strong corporate profitability in Japanese businesses (estimated USD2.5trillion on balance sheets), macro conditions seem to be improving. Last year Asian event-driven strategies attracted some USD765million and this figure could well be exceeded in 2011. It could also signal a raft of new Japan-based or Japan-focused hedge funds. Head of BAML’s Japan prime brokerage arm, Futoshi Ago, said that contraction had stopped and that a “gradual turnaround” was being seen. “We have seen launches and we will be seeing more launches in the near future,” said Ago.
