Home Stock Market Global Hedge Funds Flock to Tokyo, Seeking Talent and Capitalize on Japan’s Resurgent Stock Market

Global Hedge Funds Flock to Tokyo, Seeking Talent and Capitalize on Japan’s Resurgent Stock Market

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Global hedge funds and asset managers are flocking to Tokyo, drawn by the resurgent stock market and improving corporate governance in Japan. As the Nikkei 225 index reaches its highest level in over three decades, big investors, including prominent figures like Warren Buffett, are capitalizing on the country’s promising equities market. This surge of investor interest has prompted hedge funds and asset managers to seek talent and expand their operations in Tokyo.

The shift in corporate governance practices has particularly attracted activist investors, who have historically faced challenges in effecting change within Japanese companies. According to data from IR Japan, the number of activist funds has tripled over the past five years, reaching a total of 69. This increase reflects the growing opportunities for activists to engage with companies and drive improvements in governance and shareholder returns.

However, talent acquisition poses a challenge for hedge funds entering the Japanese market. Stefan Nilsson, who manages the Hedge Funds Club in Tokyo, notes that finding skilled traders, quants, marketers, and business development professionals who can assimilate culturally can be difficult. Traditional Japanese workers typically expect long-term job security, making the dynamic and uncertain nature of hedge fund employment unfamiliar territory for them.

Recognizing the potential of Tokyo as an international finance hub, the government has taken steps to address the hurdles that previously made the city less attractive compared to financial centers like Hong Kong and Singapore. Revisions to the tax system for foreign fund managers and the provision of English-language services to aid local registration have made Tokyo more appealing to global firms.

Masa Yanagisawa, Head of Prime Services Japan at Goldman Sachs in Tokyo, highlights that many global hedge funds are opening offices and actively hiring talent to support their growing investment focus. Portfolio managers and analysts specializing in equity long-short strategies and macro strategies are particularly in demand.

One example is Hong Kong-based activist hedge fund Oasis Management, which has hired professionals in Japan this year, including a former senior regulatory official who joined its advisory council. Oasis founder Seth Fischer acknowledges the need to hire in order to continue their work in Japan. As corporate governance improves, previously challenging companies become more receptive to engagement with activist investors.

Tokyo’s appeal as a financial hub has also been bolstered by the efforts of organizations like FinCity.Tokyo, which aim to promote the city as an attractive destination for asset managers. In the last financial year, FinCity.Tokyo facilitated the entry of firms with over $500 billion in assets under management, marking a significant increase compared to the previous year.

Notable hedge funds are expanding their presence in Tokyo to capitalize on the growing opportunities. Point 72, a U.S. hedge fund managing around $28.3 billion in assets, plans to increase its Tokyo team to 50 people by the end of the year. The expansion will focus on bolstering its equity long-short business, computer-driven multi-asset trading, and global macro strategy.

Citadel, a larger rival to Point 72, is preparing to reopen an office in Tokyo this year. Citadel Securities, the market-making business founded by Ken Griffin, opened an office in Tokyo last year to enhance its fixed income operations.

Foreign investors are increasingly drawn to Japan due to its relatively cheap valuations. The Nikkei is trading at 1.9 times book value, well below the S&P 500’s 4 times and the Nasdaq Composite’s almost 5.7 times, according to Refinitiv. This has prompted global funds to allocate more capital to Japanese equities.

The rising demand for talent in the industry has created bidding wars among funds for experienced professionals. As a result, firms are starting to explore younger candidates, including recent graduates, particularly those who have pursued degrees overseas. Some firms have even opted to acquire entire teams to expand their capabilities. Swiss wealth manager UBP recently acquired Tokyo-based investment adviser Angel Japan Asset Management, adding a team of nine dedicated to small-cap stocks to their existing Japanese long-short equity team.

UBP senior analyst Cedric Le Berre notes that investor appetite for Japan continues to grow. As some global investors reduce their exposure to China amid geopolitical tensions, they are reallocating their funds to Japan, attracted by the country’s stability and potential.

In conclusion, Tokyo’s resurgent stock market and improved corporate governance practices have positioned the city as an attractive destination for global hedge funds and asset managers. The influx of talent and capital indicates the growing interest in Japanese equities and the potential for further growth. As these firms expand their operations in Tokyo, they aim to leverage the opportunities presented by Japan’s evolving financial landscape while contributing to the continued development of the country’s capital market.

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James

James T, a passionate crypto journalist from South Africa, explores Litecoin, Dash, & Bitcoin intricacies. Loves sharing insights. Enjoy his work? Donate to support! Dash: XrD3ZdZAebm988BfHr1vqZZu6amSGuKR5F

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