There was a time that the annual Goldman Sachs gathering for Asia-focused hedge funds was one of the star attractions in a travelling hedgie’s calendar — second only to CLSA’s glittering annual Tokyo conference (known for its big-name speakers, lavish hospitality and celebrity acts).
But, as we’ve noted before, times have changed.
Exuberance was in short supply at this week’s Goldman hedge fund symposium held in Tokyo’s chic Four Seasons Hotel at Chinzan-so. Even though it was the gathering’s 10th anniversary, some participants noted there was a slightly depressing “fin de siecle” feeling to it all - as many signalled their dissatisfaction with having to travel to Japan for the annual gathering.
The turn-out, estimated by some participants at 400 to 500, was way down on previous years. There were about 40 hedge funds set up in small cubicles in a single large meeting room to brief prospective clients, unlike previous years when they were spread over a couple of floors — with the big-name funds, of course, on the top floor. Not surprisingly, after a fairly horrible year for the industry, there were virtually no new funds attending, whereas in previous years the Goldman gathering was seen as a perfect launch pad for a new Asia-focused hedge fund.
What, just a buffet?
Over a one-and-a-half day event — rather than the previous span of two-and-a-half days - nocturnal entertainment was thin, to say the least, having shrunk to one evening buffet dinner at the hotel, and a late-night drinks session in the entertainment district of Roppongi. In previous years, much fun was had by all in extracurricular activities that included tours of Tokyo and parties in restaurants.
In terms of content, there was much sobering talk of a less competitive environment with far fewer prop desks and global hedge funds active in the region, lower industry assets and leverage on those assets. However, there were some “serious presentations” on issues facing the industry, particularly in Asia, that were reasonably well-attended, according to some participants.
On the fringes of the gathering, the talk was about happy things such as fund outflows and negative surprises including the Japanese debt crisis, currency fluctuations, and pressure to revalue the renminbi. On a more optimistic note, however, there were many comments on expectations of growth in M&A next year — although with M&A activity in Asia about 60 per cent below the peak in 2007, it’s almost a case of “nowhere to go but up”. Many managers took the view that this year was one of consolidation and financing, but next year should see a shift towards corporate thoughts of expansion.
Tokyo hedgie outflow
Meanwhile, the gripes about the event’s location in Tokyo reflect a slow but fundamental shift of hedge funds out of Japan — among those staying in Asia — to Hong Kong or Singapore, while those managers coming from New York and London showed indifference. By the end of the conference, there was a strong feeling that Tokyo had had its last hurrah for the Goldman symposium.
The view on Japan as a focus for hedge funds was distinctly mixed. Indeed, many funds of funds are zero-weighted on Japan these days. Said one manager: “Japan always ends up being very painful for pan-Asian managers”. Two complaints were low sentiment and valuations, as well as ageing demographics, big public debt and forex risks, the marked decline in savings rates and deterioration of the trade balance.
Still, Japan had its defenders among the hedgies. One veteran manager at the gathering noted: “Speaking of Asia ex-Japan is like talking about North America ex-USA”. Said another: “Japan has more breadth and depth than any market outside the US. A tremendous landscape for long-short. Probably there will be a reversing of sentiment and valuations from 10-year lows. The catalyst is the ongoing IP cycle.”
On Asia in general, the mood was more optimistic, summed up in the remark of another veteran hedgie: “People don’t actually realise that retail investors are back [in Asia] — and they’re making money”.
Related link:
The truth about Tokyo - the financial sector has been hollowed out - FT Alphaville
