Hedge fund managers were almost jubilant with the robust growth reported in October, but there is still no joy in Japan, as the HF industry in the world’s second biggest economy is still striking out. Eurekahedge reports that its Japan index stands at -4.5% so far in 2006 -- a stunning turnaround from a year ago when it was soaring around 24% -- as 77% of all Japan-focused hedge funds are driving in reverse through the first 10 months. Some of the big losers include Boyer Allen Japan Fund (-18% year to date), Whitney Japan Fund (-23% YTD) and Whitney Japan Select Fund (-30% YTD). The herding mentality that has gripped Japan’s hedge fund industry seems to be the crux of the situation. “A lot of hedge funds do exactly the same and a lot of the people are in the same trades in the small space,” Stefan Bollhalder of Hedge Vision Capital, said in a Hedge Fund Manager Week interview. Bollhalder hopes to avoid such pitfalls with a new Japan long/short equity fund offered by the firm he co-founded with Philippe Gilliard. The new fund, reports HFM, intends to be flexible and “change their positions according to the opportunities in the Japanese market.” Gilliard told HFM that many of the long-only managers moving into the Japanese fund don’t know how to react in down market. “Our traders have already seen net short so they have the experience in this environment,” to which Bollhalder added, “there are not that many people making money on the short side.”
