Japan has become a bright spot in Asia’s $400bn hedge fund sector, attracting new fund launches as other regions experience closures amid a resurgence in the country’s capital markets and despite August’s wild volatility, according to a report by Reuters.
While hedge fund closures have outpaced new launches across Asia since 2023 – largely due to China’s faltering stock market – Japan-focused funds have bucked the trend. Preqin data shows a net increase of over 10 Japan-focused funds during this period, with at least five more funds, spanning equity long-short to quantitative strategies, set to debut in the third and fourth quarters of 2024, according to sources familiar with their plans.
These new funds, launched by both domestic and international firms, have been well-received by investors, with the growing interest reflecting increased confidence in Japan, a market that has been overlooked by hedge funds and other major investors for decades, despite a sharp stock market decline in August – the biggest one-day drop since 1987.
“Japan is finally changing in a positive way, with inflation and wage growth,” said Soichi Utsumi, founder of Shinka Capital Management, which is launching a Japan equity long-short fund. “I’ve never seen such big trends in my whole professional life,” added Utsumi, a former partner at Asia Research & Capital Management Limited.
Japan’s equity markets hit record highs in July, fuelled by foreign interest and corporate governance reforms. Interest rates are rising for the first time in many investors’ memories as the country’s economy shows growth. Utsumi’s fund will focus on governance improvements and opportunities created by rising interest rates – strategies that are resonating with investors.
Hong Kong-based ActusRayPartners meanwhile, a $700m quant fund, is set to launch a new Japan-focused strategy this month, with a fundraising target of $100m by year’s end.
MCP Group, a $2.5bn alternative investment firm that helps Japanese institutions invest globally, recently launched a rare Japan-focused fund of hedge funds, attracting a JPY10bn ($70m) investment from Dai-ichi Life, one of Japan’s largest insurers.
Other Japan-focused funds preparing to launch include multi-manager platform Penglai Peak Offshore Fund and OQ Funds Management’s new Japan strategy.
