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December 14, 2005
Retail investors big player in Japan hedge fund market
Japan's hedge fund market is growing in size and attracting not only financial institutions but retail investors likely seeking higher returns amid the nation's zero-interest rate environment, according to a report issued by the Financial Services Agency on Tuesday.
The total amount of hedge funds sold by financial institutions operating in Japan jumped to Y1.88 trillion in fiscal 2003 from Y766.2 billion the year before, and rose further to Y2.11 trillion in the fiscal year ended in March, according to the FSA's first-ever report of the nation's hedge fund market.
In the five years to March, Japanese financial institutions, including Japanese branch offices of foreign entities, sold a combined Y5.88 trillion worth of hedge funds in the country, the report showed.
About 50% of the total were sold to financial institutions, while individual players were the second-largest group of investors with a 16% share of Japan's hedge fund market, according to the report.
The FSA compiled the report based on a survey of 1,251 financial institutions operating in Japan, of which 1,171 replied. The research covered hedge fund activity in a five-year period of between April 2000 and March this year.
Individual players' investment in hedge funds grew 10-fold in the five-year survey period, according to the report, indicating their strong appetite for financial products yielding higher returns.
Financial institutions surveyed by the FSA had total hedge fund investments of around Y6.08 trillion as of March, the report showed. The FSA didn't provide on- year comparisons.
Of the total amount, 61% were denominated in yen, 38% in U.S. dollars and the remaining one percent in euros and pounds, the report showed.
When including investment by individual players, the total size of Japan's hedge fund market could reach up to Y8 trillion, accounting for 5% to 10% of the global hedge fund market, an FSA official briefing reporters on the report said in a press conference.
"It's a very rough estimate because it's hard to get a grasp of hedge fund activity," the official said. "But we need to closely watch how hedge funds' growing presence could affect financial markets," he said.
The official, however, said the FSA doesn't plan to set up new regulations targeting hedge funds for now because their activities can be regulated under existing rules.
-Dow Jones Newswires-
Posted by su at December 14, 2005 4:31 PM