Financial institutions are under constant pressure to reduce costs, improve operational efficiency, adapt to regulatory changes and grow their business. NRI believes that a combination financial knowledge and information technology are crucial to the industry’s growth and development. Through our lakyara reports, NRI identifies the various capital markets and IT issues impacting our clients and the future of their business.
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Under the Basel II regulatory regime, in effect in Japan since March 31, 2007, hedge fund investments require an increased risk weighting if the hedge fund does not adequately disclose its asset holdings. This change has prompted considerable interest in financial institutions' hedge fund investment activity. A recent AIMA Japan survey reveals that financial institutions finished adjusting their hedge fund allocations in response to Basel II in FY07 and have now entered a new phase of hedge fund investment in pursuit of improved returns.
In Japan's securitization market, issuance has held firm even amid the subprime crisis, but spreads have widened, reflecting investor caution. The market is offering advantageous opportunities for investors able to capitalize on them with sophisticated risk management.
Investment trust inflows have fallen sharply since last summer in response to subprime woes and the J-SOX law's advent. Meanwhile, previously out-of-favor fund categories have seen a pickup in sales, suggesting that investment trust distributors may be reforming their sales processes as intended by J-SOX.