A Hedge Funds Club survey shows that some, but not all, Japanese investors take advantage of virtual meetings with funds. But virtual solutions are unlikely to fully replace in-person meetings.
At the end of 2021, the Hedge Funds Club interviewed many investors in Japan about how the current restrictions on travel and meetings are impacting their work with fund managers. We interviewed professionals in charge of alternative investment fund allocations at Japanese institutional investors, both end investors and gatekeepers. This is not a scientific survey but rather anecdotal evidence that is a good indicator of current thinking and practices on the ground in Tokyo.
Japan is one of the world’s biggest investment markets but also a remote island nation with largely closed borders during the pandemic. It is an asset management industry dominated by conservative, old-school firms not exactly known for being at the forefront of technology and quick changes. Lots of money, yes, but not the easiest mandates to win. Two years into the global Covid pandemic, there are no signs of the virus disappearing from our lives any time soon. Thus, fund managers who want to have dialogues with existing and potential Japanese investors need to find new ways of achieving their goals of retaining and raising capital for their funds.
The results of our survey (conducted during November and December 2021) are mixed but there are some clear trends here. A few firms take a wait-and-see approach. But most firms are proactive and try to find ways of getting things done through the adaption of supporting technological solutions such as video calls. Some firms have temporary corporate rules in place banning overseas travel (often a requirement for onsite due diligence prior to a fund allocation) and meetings with overseas investors. But even without such rules, the (more or less) closed borders put a stop to almost all such meetings and trips. Many investors have seen their work with fund managers – such as fund sourcing, due diligence, selection, allocations and monitoring – dramatically slowed down. Although a few respondents say they have actually increased the number of manager meetings due to the time efficiency of video calls which cuts out time spent travelling to and from meetings. Not many, but a few in-person meetings are taking place in Japan. Those are essentially limited to meetings with funds that have people on the ground in Japan and are not impacted by the closed borders. Whenever Japan’s borders will reopen for business visitors, it seems most Japanese investors will take a cautious approach to resume in-person meetings. Very few people seem to be in a rush to go back to normal. There is still a lot of uncertainty around the outlook for new waves of virus infections. No one wants to be the firm that opens up too quickly and gets hit with a virus cluster.
“Our work with managers has been a little bit slowed down since we cannot invest into managers whom we’ve never met with in-person at the managers’ offices even under the current situation,” said a senior investment professional at one major Japanese asset manager. Others say that while they are happy to do some video calls with managers, they won’t allocate without in-person meetings. A few firms have decided to get around this issue by using partner firms or other external parties to carry out the onsite due diligence visits while borders are closed. Almost all investors prefer to do in-person meetings with funds and see video calls as a good way to make progress but not a replacement. An investor at a major bank said: “Meetings in person are always better. Video calls are better than nothing though.”
The Hedge Funds Club’s view: Both fund managers and investors need to make use of the technological solutions available to them. Technophobes will lose out. However, it is important to not over-rely on technology. Technology can never replace face-to-face meetings. Building proper business relationships require actual meetings. Video calls are a fantastic support tool that will help things move along, but it is hard to build relationships and rapport between fund managers and investors that have never met in person. People buy from people. They buy from people they like and grow to trust.
For those interested in digital marketing and how it can be applied to raising assets, the Hedge Funds Club’s partner ProFundCom will host a webinar called 3 Ways Funds Should Be Using CRM & Digital Marketing to Raise Assets in 2022 on Friday 21st January. Get more information and sign up for the webinar and/or recording here.