Japanese Gradually Take To Hedge Funds

by Mary Swire, Tax-News.com, Hong Kong

30 November 2001

Very slowly, Japanese fund managers and investors are beginning to think about alternative investment, a term which in Japan includes real estate trust instruments alongside hedge funds, reports the Wall Street Journal.

Tetsuo Kushiya, manager of the business arrangement and development department of the fixed income group at Mizuho Securities, says that shrinking returns on traditional portfolios are encouraging more and more Japanese institutions into alternative investment.

"Japanese investors will think about diversifying their portfolios, so now is the time to be aggressive" in marketing such products, said Kushiya during a panel discussion at a conference in Tokyo on alternative investment.

According to the Wall Street Journal, however, investors remain very cautious and hedge funds are perceived as being very risky. "Hedge fund performance is not always as good as some people say it is, said Kushiya. "On a yen basis, if a fund pays less than 10%, it doesn't justify what investors see as the higher risks."

Sumitomo Life Insurance Co. has invested about 30% of its Y23 trillion in assets in alternative investments, but only about 2% is in hedge funds, and the rest is in real estate or other securitized products, said Nobuyuki Yasuda, head of the alternative investment department.

"Life insurers are known for being very conservative, and we have many investment restraints, but we can find suitable products even if we make the distributors from whom we buy stick to our rules," Yasuda said.

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