News Column

Japanese Investors Planning to Maintain Hedge Fund Allocations - AIMA Japan and Eurekahedge Survey

June 25, 2014

LONDON, June 25 -- The Alternative Investment Management Association issued the following news release:

Japanese investors plan to maintain the size of their hedge fund allocations this year, according to a major new survey by AIMA Japan, the Japanese branch of AIMA, the global hedge fund industry association, and Eurekahedge, the Singapore-based data provider and research house.

The survey of more than 130 investors with over $3.8 trillion in assets revealed that the average percentage of their alternative investment portfolio going to hedge funds will remain the same for 2014 as for 2013, at 72.5%.

The survey follows strong recent performance by Japanese-investing hedge funds and funds of funds, which were up about 28% on average in 2013[1].

Many respondents indicated that they intend to raise their exposure to long/short equity hedge funds and event-driven strategies, with allocations on average being reduced to CTA/managed futures funds, macro funds and fixed income strategies.

The survey found that most Japanese investors plan to increase their allocations to global, Asia ex-Japan and Middle East/Africa mandated funds, while trimming their portfolio exposure to Latin America and Europe. Their exposure to Japan would continue at existing levels.

For the majority of the investors in the survey, performance, risk management and track record were the key factors behind their investment decisions. Brand names, governance structure and liquidity ranked lower on the scale.

In terms of regulatory challenges facing the industry, more than one-third of investors cited the prospect of increased inspections and regulations as the biggest regulatory issue facing the hedge fund industry in Japan. Around one-quarter of the respondents also said they were concerned about the impact of the US Dodd-Frank Act and the need for managers to register with the US Securities and Exchange Commission. A similar proportion expressed concerns about tougher capital requirements for funds under Basel III.

Asked about the prospects for the Japanese economy, the mostly Japanese-based investors in the survey expressed generally positive sentiment. Almost 90% regard the economic policies of the Japanese Prime Minister Shinzo Abe - dubbed "Abenomics" - favourably, while 72% predicted that its positive impact will continue in 2014. Regarding the Nikkei 225 index, 72% expected it to finish the year above the 15,000 mark and 51% thought it could reach higher than 20,000.

Shinichiro Shiraki, Chair of AIMA Japan, said: "This survey is a further sign of very high satisfaction levels among investors about their hedge fund allocations. In Japan, as elsewhere globally, institutional investors recognise the many useful roles that hedge funds are able to play in their portfolios."

[1] Eurekahedge Japan Hedge Fund Index, Eurekahedge Japan Fund of Funds Index

About AIMA Japan

AIMA Japan is a Japanese Ippan Shadan Hojin operating independently in Japan under a local license agreement. The AIMA Japan national group was formed 2001. The AIMA Japan national group complements AIMA's strong Asia-Pacific presence with other national groups established in Singapore, Hong Kong and Australia. The national group was formed in response to the strong growth in the alternative investment industry in Japan.AIMA Japan's corporate members include fund of hedge funds managers, hedge fund managers, prime brokers, fund administrators, auditors, lawyers and institutional investors. Details on how to join AIMA are available here. The objectives of the AIMA Japan national group are to: provide local representation of members located in Japan; provide a unified voice for the industry in Japan; increase investor education; increase transparency and promote due diligence and related sound practices; and work closely with regulators and interested parties in order to promote the responsible use of alternate investments.

About Eurekahedge

Founded in 2001, Eurekahedge is the world's largest independent data provider and research house dedicated to alternative investment funds. Maintaining coverage on over 29,000 funds across all strategies and asset classes, Eurekahedge strives to deliver a complete overview to its clients. Eurekahedge research covers hedge funds, funds of hedge funds, UCITS hedge funds, Islamic funds, insurance-linked securities and long-only absolute return funds. In addition to fund data Eurekahedge publishes over 100 alternative investment benchmark indices along with the monthly Eurekahedge Report covering asset flows, fund performance, macroeconomic trends, league tables and specific index returns on the hedge fund industry.

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