Basel II forces more hedge-fund transparency in Japan

Hedge funds disclose strategy in a bid to appeal to Japanese investors scared off by Basel II

The hedge fund industry is disclosing strategy in a bid to appeal to Japanese investors scared off by Basel II regulation, according to an official at Japan’s Financial Services Authority (FSA).

Japan’s Basel II rules have hampered investment from the jurisdiction’s regional banks.

In an interview given to Reuters news agency, Mitsuhiro Kawamoto, a deputy director at the FSA, said: “Hedge funds are beginning to become more transparent to investors,” adding: “Regional banks, which are not so capable of understanding what hedge funds do, are retreating from investing in hedge funds.” Japan’s Basel II regime, introduced in March this year, forces banks to back up the amount they invest in hedge funds by up to 12.5 times their initial outlay.