That about sums its up. Not only are the traditionally conservative Japanese investors slowly moving more money into hedge funds, but HF managers themselves appear to have a one-strategy mind – namely, long/short. The industry in the Land of the Rising Sun is growing, all right – from $10 billion in 2003 to nearly five times that this year – but it’s almost all in long/short strategy, which accounts for 91% of the total assets, according to Lipper HedgeWorld. This year, 75% of Japan-focused hedge funds debuting this year were long/short, with a smattering of multistrategy and event-driven. Let’s face it, Japan has a problem with creative diversity, but it may not be the managers’ fault; they just may very little to play with. Says Lipper Hedgeworld, there’s no convertible arbitrage because money in Japan has been cheap for so long, and with near-zero interest rate and narrow credit spreads, there’s little opportunity to capitalize on those. “It’s a bit of a problem,” one attendee at Japan hedge fund conference told Lipper Hedgeworld. “In Japan, one manager goes down one road, the others follow.” It appears that long/short hedge funds have been making a profit by investment in small caps and selling large caps, which has been successful – until this year when small caps went into a tailspin as a result of a scandal involving Livedoor. With little strategies to choose from, says Lipper, there’s another HF product that is not likely to make a whole lot of sense, a Japan-focused fund of hedge fund. Variety is the spice of hedge fund life, too.