Hedge Funds Ditch Japan for Asian Investments, Goldman Says
By Tomoko Yamazaki and Takahiko Hyuga
Nov. 26 (Bloomberg) -- Hedge funds are shifting Asian investments out of Japan because of lower returns and poor corporate governance in the region's biggest economy, Kathy Matsui, Goldman Sachs Group Inc. chief strategist in Tokyo said.
Japan's average return on equity will be about 10.2 percent this fiscal year, compared with 20 percent in the U.S. and 15.7 percent in Asia, according to Matsui. Return on equity is a measure of how well a company uses its cash to generate profit.
Meanwhile, Japanese companies are fending off takeovers by foreign firms seeking to boost share prices, by purchasing stakes in each other or taking so-called poison pill measures. Four hundred Japanese companies, or 10 percent of all publicly traded firms, have taken steps to fend off hostile takeovers, according to a Nikkei newspaper survey published in October.
``I meet foreigners all the time; there has been disappointment with the Japanese market,'' said Matsui in a telephone interview. ``So Japan has been the favorite short, and that's been the price action.''
The Nikkei 225 Stock Average is down 4.3 percent this year in dollar terms and may be headed for its worst year since 2002. The Eurekahedge Asia Ex-Japan Hedge Funds Index has returned 35 percent this year, compared with a 1.9 percent advance in the Eurekahedge index that tracks hedge funds that invest in Japan.
The majority of about 700 international investors attending a Goldman Sachs two-day conference in Tokyo earlier this month were interested in investments in Asia, according to three attendants including Hiromichi Tsuyukubo at Myojo Asset Management Japan Co.
``Interest in Japan was on average lower than last year,'' said Tsuyukubo, who helps look after about $800 million in assets at Myojo Asset, a Tokyo-based hedge fund. ``But the good thing was that the conference attracted a lot of long-term investors such as college foundations and family offices
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