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New Managers July 2014

FUND PROFILE: Convector Capital, Mayar Capital, 1900 Investments

Convector Capital: most of Japan's third arrow reforms are disappointing Emmanuel Ferreira

As Japan is about to launch Abenomics' third arrow reforms, an emerging long/short equity hedge fund manager comments.

In a televised address to the nation on Tuesday, Prime Minister Shinzo Abe disclosed a new set of economic policies intended to kick-start growth in Japan. Mr. Abe had already implemented monetary and fiscal stimulus to raise economic growth 18 months ago, the so-called first two "arrows" of his Abenomics agenda. According to the New York Times, the most highly anticipated third arrow — changes intended to bring a healthy dose of competition and innovation to the economy — has largely underwhelmed. The final details of his plan to lower corporate tax rates are not finalized and under threat, and compromises had to be made on the labor market deregulation proposals. However, there is a strong set of proposal in place for the overhaul of corporate governance and a code is being prepared, says the paper. Abe also wants a reduction in cross-shareholdings, which is common among Japanese corporations.

Critics described the latest measures as resembling a dart more than an arrow with few of the more than 230 proposals likely to take effect, or have the desired impact, given resistance to change in Japan's business world and bureaucracy,The Guardian reports

Timid reforms

According to Convector Capital Management, an alternative asset manager based in New York, most of the reforms are disappointing.

David Malpass, Senior Advisor at the firm, writes that for a start, the corporate tax cut will be offset by tax increases elsewhere, so won't show obvious benefits. There are measures to encourage woman to join the labor force but other labor market reforms are marginal.......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
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