Monday, August 5, 2013

Massive Inflow into Japan, Often from China Redemptions

Last week was July 31st, the last chance for many long only and hedge fund portfolio managers to justify returns on capital before a redemption decision.  Most investors have a 30-45 day notice cycle if they want to take their money back before the end of a quarter. If investors see a better return on capital from October 1st, that means in many cases they have to redeem between August 15 - 30. In fact, investors are looking to massively move China dedicated capital into Japan.

If you are running a portfolio as a hedge fund prop trader or a long only fund manager, these dates are important as they determine your income. No major money to run means no major bonus to look forward to.  Some poor performers always get nervous around redemption time. It is the season for excuses.  The industry knows the rules, and if you are a "beta jockey" riding a positive wave, your luck will end, and so will your capital base.  Only "Alpha PMs" win long term in this game.  Winning performers gain the most capital when returns have to be counted and allocated.

This year has been one of change: last December 2012 was a warning short for Japanese markets - a new prime minister, one of many, was actually going to change things for the better. If you heard that message early you rode a huge wave of positive beta first and booked positive alpha later.  Many Pan-Asia PMs that we speak to have debated how long Japan will have legs and if a China collapse will take place.  If you thought Japan would be a little pop you were wrong.  If you thought China would collapse you were wrong again.  The winners in the mix have seen China as dead money this year and moved capital allocations into Japan. Then these true "Alpha Players" of the market today picked shorts over the last three months and booked more profits for Japan.

At TMJ Partners, we listen to the Alpha players everyday, and contrast their opinions with the beta jockeys soon to be forgotten. Our professional market observations & insight let our financial clients know where to be before their rivals, and stay profitable. When it comes to client focus it is always win/win.

For more Buy-Side and Sell-Side roles in Asia-Pacific, contact our TMJ Partners Japan & Asia Finance team.

Tokyo                                                              Tokyo
    Mark Pink                                              Shinichi Nagasawa

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