Sitting in his Tokyo office, Edward Rogers bellows with laughter. In the five difficult years since he launched his own fund-of-hedge-funds firm, the CEO and CIO of Rogers Investment Advisors has kept his sense of humor.

Although some might question the sanity of opening a hedge fund business in Japan, Rogers’s good cheer and persistence in rough markets have paid off. As of September 30 the $100 million Wolver Hill Japan Multi-Strategy Offshore Fund he advises had gained an annualized 2.4 percent since its October 2006 inception. The Tokyo Price Index fell 14.4 percent during the same stretch, while the Eurekahedge Japan Hedge Fund Index rose just 0.7 percent.

Rogers, 46, beat the indexes with one quarter the volatility of the Topix. “Hedge funds are absolutely the smartest way — quite possibly the only sensible way — to invest in Japanese public equities,” he says. “We have allowed our investors to sleep well at night.”

The same can’t necessarily be said for Washington native Rogers, who first came to Japan in 1987 and has lived there on and off for 17 years. Things haven’t turned out the way he hoped in 2006, when he quit his job as Deutsche Bank’s head of Japanese prime services sales to go solo. His plan was to raise $500 million, mainly from U.S. investors, for a Japan fund. But amid rumors that Japan Inc. was headed for a fall, he only managed to cobble together $4 million.

Rogers Investment Advisors has since boosted its advisory assets to some $140 million, with almost $40 million committed to a new all-Asia fund that Rogers is pitching globally. The firm has grown from a two-person start-up to an 11-person company with offices in Tokyo and New York, where Rogers-owned Wolver Hill Advisors officially does all the trading for the Japan Multi-Strategy fund.

When it comes to trades, there’s little doubt that Rogers’s Tokyo team calls the shots. But this overseas setup speaks to the challenges of running money in Japan — even for Rogers, a Japanese speaker who got to know the hedge fund fraternity well during his half decade at Deutsche Bank. Unlike Hong Kong and Singapore, his adopted country doesn’t smile upon hedge funds. “Japan is the hardest place in the world to do business,” says Christopher Wells, a partner with law firm White & Case in Tokyo, where he heads the local chapter of the Alternative Investment Management Association.