The AlphaWeek And Sussex Partners Japan Hedge Fund Industry Survey, 2022 Edition

Welcome to the 2022 edition of the AlphaWeek and Sussex Partners Japan Hedge Fund Industry Survey.

This is the third iteration of the survey, and this year we’re grateful to the 23 management companies that took the time to complete this year’s survey.

It’s been an eventful year for Japan. The delayed Olympic and Paralympic games took place in the summer, despite opposition from a vast majority of the population; the country’s roll out of Covid-19 vaccines was, compared to many countries in the West, slow, causing unrest amongst the population; and the country held a General Election in October.

Despite the tumult, the Japanese public equity market has had a solid year, delivering returns of approximately 12% at the time of writing. In September, the TOPIX closed at levels not seen in 30 years, as investors became optimistic that a new administration would better deal with the Covid-19 crisis.

The vast majority of the Japanese hedge fund industry is comprised of equity hedge fund managers investing in the Japanese market and thus they will be compared, rightly or wrongly, to the performance of the Japanese equity market, and in 2021, they have underperformed. However, Japan hedge fund bulls will point to quantitative easing and short squeezes playing a part in the advancing valuations of Japanese public equities this year, all short-term factors that institutional end investors with a long-term mindset should consider when they compare Japanese hedge fund managers with passive, long-only investment vehicles.

Structural tailwinds including the changes forced on Japan Inc., by Japan’s Stewardship Code and Corporate Governance Code should continue to provide opportunities for managers able to identify undervalued stocks. The lack of sell-side coverage of the mid- and small-cap space remains, and Japan’s equity market provides plenty of liquidity and access to short-selling to generate alpha in all weathers. It perhaps comes as no surprise that every single one of our survey respondents this year is bullish about their opportunity to generate alpha in the coming 12-24 months.

Our thanks go to Sussex Partners, The Consortium for Japan International Asset Management Center Promotion (JIAM) and to the people who took the time to complete this year's survey. Please click on the link below to download The AlphaWeek and Sussex Partners Japan Hedge Fund Industry Survey 2022 Edition.

The AlphaWeek and Sussex Partners Japan Hedge Fund Industry Survey 2022 Edition

Greg Winterton

Founder, Managing Editor

AlphaWeek

December 2021