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Benedicte Gravrand reporting on the recent Opalesque Roundtable in Tokyo.

It is well known that many Japanese institutions sit on a lot of cash. For that reason, many overseas managers pay them a visit them in the hope of raising some for their own hedge funds.

However, according to Chris Wells, Tokyo-based partner at the international law firm White & Case, it is time for them to face a big reality check: “… allocators here are very much in shell shock. It takes time to get over the terrible losses they have suffered over the past year, especially in Japan as a consensus-based society. It takes time for allocators to realize how much they really have lost. A lot of investment staff aren't even telling their bosses how bad it is - so the losses are going to take a while to flow through - and they certainly don't want to tell their ultimate investors or shareholders about how much was lost.”

For this reason, any capital going out of Japan is more likely to go to fixed-income and infrastructure. It will eventually reach the hedge fund space – as indeed Japanese allocators are losing the traditional ‘fixation’ on brands and reputation, and are turning more towards returns and strategies. Some of the big allocators are even starting from ground zero in the hedge fund space.

Chris Wells also pointed at ‘dark clouds on the hedge fund horizon’: Japan’s regulation and report......................

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