TOKYO: Global hedge funds and asset managers are scouring Tokyo for talent to expand in Japan and ride a surge of investor interest that has lifted the stock market to its highest in more than three decades.
Lured by signs of improving governance and better shareholder returns at many companies in the world’s third-largest economy, big investors – including the likes of Warren Buffett – have piled into Japanese equities this year. That has helped send the Nikkei 225 up some 22 per cent, making it one of the best-performing benchmarks this year.
The shift in corporate governance has been a draw for activist investors, which previously struggled to change the status quo at Japanese companies. The number of activist funds has trebled over the last five years to 69, according to data from IR Japan.
“Great traders, quants, marketing and business development people are in short supply – especially those that can fit in culturally,” said Stefan Nilsson, who runs Hedge Funds Club in Tokyo, an industry networking group.
“Japanese workers still largely expect jobs for life. Joining a hedge fund where you might lose your job tomorrow because you lost money or didn’t raise funds is a very foreign world for such workers.”
The government also wants to improve Tokyo’s standing as an international finance hub and has addressed some of the hurdles that made it less attractive than Hong Kong or Singapore, revising tax systems for foreign fund managers and launching services in English to help firms register locally.
“Many global hedge funds are opening up Tokyo offices and hiring talent” to support a growing investment focus, said Masa Yanagisawa, head of prime services Japan at Goldman Sachs in Tokyo.
Portfolio managers and analysts specialising in equity long-short strategies and macro strategies are among the most in demand, he said.
Hong Kong-headquartered activist hedge fund Oasis Management has hired people in Japan this year, including a former senior regulatory official it appointed to its advisory council.
“We need to hire to continue our work in Japan,” Oasis founder Seth Fischer said, adding that improving corporate governance meant companies that had been “very difficult to engage with” were becoming more open.
FinCity.Tokyo, a public-private organisation set up to promote the capital as a financial hub, helped bring in firms with more than $500 billion in assets under management in the last financial year, more than 10 times more than a year earlier.
“Tokyo is increasingly attracting big asset managers,” said FinCity.Tokyo co-founder Keiichi Aritomo.
US hedge fund Point 72, which managed around US$28.3 billion in assets as of April, expects to expand its Tokyo operation to 50 people by the end of this year from a little more than 40 earlier this year, according to a person familiar with the matter.
The new positions will bolster its equity long-short business and its computer-driven multi-asset trading. It is also looking to add headcount for its global macro strategy in Tokyo.
Point 72’s head of Japan, Toby Bartlett, said it was committed to growing its presence and “actively looking for smart and seasoned risk-takers”.
Bigger rival Citadel is preparing to reopen an office in Tokyo as early as this year, according to a person close to the firm.
Citadel’s market-making business, Citadel Securities, opened an office in Tokyo last year to bolster its fixed-income operation.
Foreign investors are seen buying more, given the 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.
Funds often poach experienced talent from other funds, which can create bidding wars, Goldman’s Yanagisawa said. But the increase in demand means firms are starting to look at younger candidates, including new graduates, and particularly those pursuing degrees overseas, he said.
Some are scooping up whole teams.
Swiss wealth manager UBP, which has around CHF 140.4 billion (US$157 billion) under management, in May acquired Tokyo-based investment adviser Angel Japan Asset Management, adding a nine-member team dedicated to small-cap stocks to its own team focused on Japanese long-short equity strategy.
UBP senior analyst Cedric Le Berre said it aims to further expand its Japan coverage team as investor appetite is only increasing.
“Some global investors are already downsizing their exposure to China, and redeploying this cash in Japan given all the tension and risks associated with China and Taiwan,” he said.