Hedge Funds Japan M&A
Hedge Funds Return to Japan in Hopes of More M&A
Hedge fund managers have set their sights on Japan once again as corporate activities are expected to pick up in the country. Mergers and acquisitions and share buy-backs could make strong returns for those hedge funds operating there. Japan has seen an outflow of hedge funds over the last few years so it is a welcome sign of optimism.
The resurgent interest in Japan could mark a turn in the fortunes of the country's hedge funds industry, which has seen a sharp drop in assets and the number of funds since 2006 as the market peaked.
Hedge funds are betting the current environment is ideal for strategies such as event-driven and long/short, given that many companies are trading at low valuations and funding is cheap -- conditions ideal for M&As.
A stronger yen has prompted domestic firms to buy new production plants abroad and go in for deals. In a symbolic move, Japan's two major steel makers, Nippon Steel Corp (5401.T) and Sumitomo Metal Industries (5405.T) have announced merger plans.
Other factors favoring a relook at Japan are the recent shift in capital flows in favor of developed markets, strong corporate profitability -- which has left companies with about a record $2.5 trillion in cash -- a rebound in exports driven by robust demand in fast-growing Asia and hope that the economy is heading toward a moderate recovery. Source
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