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Japan banks cautiously eye hedge funds 

March 22, 2016

Douglas Appell, Pensions and Investments

Tighter Basel III capital requirements are raising the hurdles for hedge fund allocations by Japanese financial institutions, but a bleak outlook for capital market returns this year could leave a growing number of banks, big and small, looking to clear them, money managers predict.

Japan Post Bank — the country's biggest — could get the ball rolling soon after the April 1 start of Japan's fiscal year. A Tokyo-based spokesman for the recently privatized behemoth, with ¥205.1 trillion ($1.7 trillion) in deposits as of Dec. 31, confirmed that a search for hedge fund-of-funds managers is underway. The spokesman said there were no further details to disclose at present.

Hedge fund managers, who declined to be named, said Japan Post Bank will select two or three managers in the next few months to run as much as $10 billion.

In addition to giants such as Japan Post Bank, smaller players — including regional banks, with a combined ¥234 trillion in deposits as of March 31, 2015 — might begin coming to the table as well, driven by the same bleak capital markets calculus, market players contend.

With the typical pension fund, insurance company or regional bank now facing negative yields on hefty allocations to Japanese government bonds, “everything we're hearing (suggests) more and more interest and desire and impetus to put money into alternatives,” including hedge funds, said Ed Rogers, CEO of Tokyo-based Rogers Investment Advisors. Read more


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