Investing in hedge funds by wealthy Japanese more than doubled in the year to last March, according to an authoritative survey from Japan’s financial watchdog, reports the FT.
The report, issued this week by the Financial Services Agency, also showed a healthy 41 per cent increase in all hedge fund sales by financial institutions. It comes at a time when renewed weakening of the yen is bound to fuel Japanese appetite for the yen carry trade, much of it among individual investors.
The survey, which carries the stamp of government authority, should help end scepticism among some analysts about the success of hedge funds in Japan, even though the data is more than a year old.The results of previous surveys, difficult to conduct because of the secrecy of the hedge fund industry, have been questioned by analysts, some of whom have cast doubt on whether hedge funds have gained a genuine foothold in the world’s second-biggest economy.
The FSA survey found that, in the year to March 2006, financial institutions based in Japan sold a chunky Y2,956bn ($25bn) in hedge fund products to Japanese investors. About 23 per cent of this – approximately Y680bn – was to private individuals.
The Japanese securities houses that dominate the high net worth hedge fund market say they have seen strong sales again this past year.
So far, so good for Japan’s retail hedge fund market, noted the FT’s David Turner in an earlier report. But how long will the interest last? It is not yet clear whether Japanese investors are treating hedge funds as an attractive fad at a time when domestic investments do not appeal, or a hardy perennial within their portfolios.
But Tohru Sasaki, JPMorgan’s chief forex strategist in Japan told the FT last month that the volume of forex margin trading by Japanese individual investors was probably larger than trading by hedge funds and is likely to continue growing.