Japanese Institutions Increase Hedge Fund Allocations

Sep 22 2011 | 8:43am ET

Japanese institutional investors are generally bearish on hedge funds, according to a new HFC Advisory survey, which shows 42% plan to increase their hedge fund allocations in the near term.
 
The Tokyo-based consulting and research firm interviewed a wide range of Japanese investors between May and August for its Hedge Funds Club Japan Investor Survey 2011. Respondents included pension funds, insurance companies and funds of hedge funds, among others.
 
“Japanese investors are by far the most important hedge fund investors in the Asia-Pacific region. The survey shows that investments in hedge funds are growing and that pension funds in particular keep increasing their allocations. Japanese investors are active investors in global alternative investment products but I feel that hedge fund managers need to better understand the needs of Japanese institutions in order to access this large market,” said Stefan Nilsson, CEO of HFC Advisory and founder of the Hedge Funds Club.
 
The survey showed Japanese pension funds are increasing their hedge fund allocations—the average allocation among the pension funds surveyed was 21%.

Equity long/short was the strategy of choice in 2010/2011, but looking ahead to 2011/2012, global macro/managed futures has the edge.
 
Most of the investors surveyed allocate the majority of their money to liquid strategies but there was reasonable interest in less liquid strategies, like credit and distressed, and other more niche strategies.

And investment consultants take note: Japan may be something of an untapped market—a full 63% of respondents said they did not use one.

Despite an increasing trend toward direct investment, 58% of respondents either do both single manager strategies and funds of funds, or allocate funds of funds only.

The main concerns expressed about hedge fund investments were liquidity, transparency and fraud.
 


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