The environment for hedge funds varies drastically by country. In Tokyo, Japan a hedge fund manager might encounter tougher regulations and higher taxes than in, say, Singapore or Switzerland. In this video recorded in Tokyo after speaking to the Hedge Fund Congress in Japan, I talk about family offices and hedge funds in Japan and how Japan is different from other Asian countries in terms of regulation, available services, industry growth, taxes and other areas.

Video Transcript/Summary: The strategies and tips provided within this video module include:

Family offices in the traditional sense are not available in Japan so family offices are growing in neighboring locations.
There is an enormous amount of wealth being created in Singapore.
If you are looking to start a hedge fund in Japan you will encounter a lot of regulation and the process could take a very long time.
Singapore offers a much easier, quicker hedge fund startup process.
Taxes in Japan are comparable to the US, while Singapore has the most business-friendly tax environment.

Transcript for Hedge Funds in Japan

Hello, this is Richard Wilson. I’m coming to you from Tokyo, Japan today. I just finished speaking at the Hedge Fund Congress in Tokyo downtown. And what I want to do is share with you an update just on family offices to family office wealth management industry and the hedge fund industry here in Asia. This summer I’ve been traveling around to Singapore, Hong Kong and Tokyo, Japan and I wanted to just share what I’ve learned about what’s going on in these areas.

First off, family offices aren’t really allowed in this very sense or the term in Japan due to regulations, so really what they have here is retail banking and you get more service basically if you’re a high-net-worth or ultra high-net-worth professional. What that means is that family offices in other areas are going faster than others would, because people in Japan don’t really have the type of service here. So family offices in Hong Kong, China and especially Singapore are growing very quickly, that’s what’s interesting about Singapore, is that just in the last year and a half over a million new people have moved to Singapore and it has grown from 4.2M up to over 5.5M people.

The amount of wealth there is enormous. It’s one of the richest cities in the word that has more billionaires per capita than any other place in the world. Also, 1 out of every 25 people in Singapore is a millionaire. Now, when it comes to the hedge fund industry, what I’ve been learning here is that if you’re going to start a hedge fund there’s so many regulations in Japan. Often times it can take 6, 8, 12 months to start a hedge fund. There’s a lot of red tape, whereas if you start a hedge fund in Hong Kong, your rent and your expenses are higher, your overhead is higher. It’s a little bit more expensive, where if you start a hedge fund in Singapore, you can get registered typically within 2 to 4 weeks to open up your fund for a third of the cost. What it might cost you in Hong Kong is a lot lesser in cost here in Tokyo. So the result is that a lot of people are going to Singapore.

When it comes to taxes, which affects both family offices and hedge funds, the tax rate here in Japan is around 40% and Hong Kong I’ve heard it’s around 16% and in Singapore I’ve heard it’s around 11% to 13%. So basically Singapore has the best tax situation and tax environment for both wealthy individuals and hedge fund managers. Hong Kong comes in second with higher taxes, around 16% but also higher cost of living than Singapore. And then Japan is sky high in terms of taxes. It’s pretty close to the United States.

So if you think about where to start a hedge fund, Singapore and Hong Kong have the least regulations and least expenses for getting started. They have lower expenses in operating than Tokyo and lower taxes. And because Singapore is the easiest to work in, the least regulation, the lowest taxes, there’s just this huge influx of assets and money coming to Singapore. I’ve heard Indonesia, Malaysia, New Zealand, even Australia, Japan and China, lots of people are going to Singapore. I imagine it’s going to keep on growing very quickly and that’s the number one lesson I’ve learned traveling here in Asia and speaking at a few conferences and meeting with lots of different wealth management firms and hedge fund managers is that Singapore is really becoming a huge hub for growth in the future.

Of course China, Hong Kong, Tokyo, all these other big cities and lots of further growth and emerging markets, as there are some other, I’ve heard they have huge markets already. I do think Singapore is going to be the head of where a lot of business is done in the future. So I hope you enjoyed this update on Asian hedge funds and family office wealth management industry here in Asia. I know it wasn’t really in depth. For those of you wondering how things worked over here or you’re looking to raise capital in this region or if you’re looking to start a hedge fund and you’re based in Asia or near Asia and you’re wondering where in Asia possibly to start your hedge fund, I hope this video helps you on your way and to give research on that topic.

Thanks for joining me. I’m Richard Wilson and we’ll see you again soon.

When hedge fund managers are deciding whether to start a hedge fund in Japan they must consider the amount of regulation and level of taxes compared to Singapore or Hong Kong. I hope that you enjoyed this update on hedge funds in Japan.

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Many emerging managers and hedge fund startups mistakenly believe that just because they have a great strategy investors will eventually flock to their hedge fund. Hedge fund investors like to see that you have a strong hedge fund business model and that you are of institutional quality. In the following video, I provide some tips and strategies for getting your hedge fund ocean-ready.

Video Transcript/Summary: The strategies and tips provided within this video module include:

If you go out to meet investors too quickly, you could do a lot of damage to your hedge fund.
Some funds are too eager to raise capital and present their fund at a point when the fund is not yet at 100% and you risk losing that investor forever.
You want to have all your marketing materials and your investment strategy prepared and well-polished.
It’s ideal to have a lot of investors and consultants that will give you some advice early on in your fund’s lifetime and many managers try to launch so fast that they have not developed these relationships.

Transcript for Ocean-Ready Hedge Fund Business Model

Hello, this is Richard Wilson and today I’m going to talk to you from here in Nice, France about making your hedge fund business seaworthy or ocean-ready. Well, I’ve been learning more about sailing in these past few years while raising capital and working in a hedge fund industry. And I think one truth about a hedge fund industry is that if you launch your hedge too quickly and you go out and meet with investors too quickly and too many different types of investors too quickly, you’re going to get recorded in different institutional databases as being unprofessional, as not having a clear investment process. You’re going to do a lot of damage.

I even spoke with somebody at the game 2011 conference last week about this. And they said that they only represent and they only raise capital for fund managers within in their first 6 months of launching their fund, because otherwise they’ve probably already done so much damage for themselves in the industry, that’s a waste of their time but you can work with them. I think that’s a little bit extreme but I think the advice goes along with what I’m trying to tell you right now is that when you’re sailing in a bay as many sailboats do here around Nice, you can have some things that aren’t totally working well in your boat.

Your rigs cannot be set up right, your ropes could be loose, maybe a couple of your sails are in bad shape, maybe the things on the walls of your sailboat inside the boat aren’t really secured. But if you go out in the ocean you really need to be kind of sea-ready or ocean-ready or seaworthy. In other words, if you get in a storm or if you go over a bunch of swells you don’t want things flying around inside the cabin of your boat. If you need to have your main sail work because your engine dies, you really need that main sail to work. You can’t really rely upon, you got a coast guard in the bay that he’d come, tow you over 50 feet to your dock. It’s much more serious when you’re out in the ocean.

So it’s really a great analogy for running, starting and growing your hedge fund because before you go out and meet with very important investors, you don’t or you have a great relationship with, you really want to have everything walked down and in place. You want to have your marketing materials, kind of in grade A shape, institutional quality, everything that you’ve shown an investor you want to have looked at 5 times by people in your team, do the fifth draft, have it compliance approved. If somebody is going to ask you for a standard DDQ or a question that comes in a standard DDQ you should be able to answer within one business day, not a week or two.

Everything you do in your business should be well-polished by the time you’re meeting with new investors. Hopefully when you launch your fund you’re able to balance ideas off of consultants, advisors, service providers and some investors you already have good relationships with, then that’s how you get the important feedback and really figure out what’s your checklist, what’s those 20 or 30 things that you are kind of seaworthy before you go out and start meeting with investors face-to-face about your fund.

And this is something that I think is a common mistake to make. People want to get out there and raise capital really quickly, you know speed an implementation, just get out there and meet with investors and get great feedback, but really you need to be very cognizant of the fact that if you do that too early and too fast, you’re really going to hurt yourself and you could sink your boat very on in the process, whereas if you just take that first valuable piece of the feedback from your investors, really use it, implement it, and evolve your fund at higher levels before taking it out to 300 different investors, you’re going to be much better off in the long run.

So I hope you enjoyed this video. It’s Richard Wilson coming to you from Nice, France and we’ll see you again soon.

Before you go out and try to meet with investors to present your fund it is important that you have your hedge fund business model well-established and storm-tested so that it can stand up to inspections by hedge fund investors.

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