Hedge funds wooed back to Japan

Japan, a frustration for the world's sharpest hedge fund minds for more than a decade, is proving one of the industry's biggest winners this year.

Big names from New York to London have made billions betting that "Abenomics" - the monetary stimulus programme launched under Prime Minister Shinzo Abe - would send the yen sliding and stocks surging.

And funds dedicated to Japanese markets have performed better than others - their percentage return on investments is more than triple the overall hedge fund average this year, according to data from Hedge Fund Research.

Now there are tentative signs that funds are preparing for a more structural shift back into Japan, convinced that if its economy is finally on the road to recovery, they can no longer ignore the world's second-largest financial market.

"Japan has been a relatively ignored and underinvested market for a long time," said Nick Linnane, a hedge fund manager at Cube Capital who previously worked in Japan and has investments in several Japanese banks. "The consensus now is you need to do your research."

Some funds are dusting off their old contact books to recruit stock pickers who can grapple with Japan's complex corporate make-up, while more Japan-dedicated funds are opening than closing for the first time since 2007, data from industry tracker Eurekahedge shows.

This reflects the view held by a growing number of funds that there is money to be made in Japan beyond riding the big moves that have followed in the wake of the monetary stimulus.