• Japanese households keep $7.3 trillion in cash or deposits
  • 55% of Japan's household financial assets sit in the banks

GCI Asset Management is joining hedge-fund managers tapping an increasing risk appetite among Japanese retail investors who boast the world’s second-largest household wealth.

The company is starting GCI Endowment Fund that will enable individuals to put their money into a portfolio including a top-performing Japanese hedge fund run by GCI, said Tatsuhiro Iwashige, chief foreign-exchange strategist of the investment solutions group at GCI. The fund will have diverse holdings, with 30 percent in futures and currencies through GCI’s hedge fund, while the rest will be allocated to exchange-traded funds and real estate investment trusts.

GCI is among hedge funds including Winton Capital Management Ltd. and Man Group Plc that are going after some of the 883 trillion yen ($7.3 trillion) of household wealth that is in cash or deposits. That represents more than half of the nation’s household assets, compared with 13 percent in the U.S. and 35 percent in the euro area, according to the Bank of Japan.

“Up until now, Japanese as individuals haven’t really had a chance to directly invest in hedge funds,” Iwashige said in an interview in Tokyo. “We are not urging people to take reckless and careless risks. We want to provide a chance for them to choose a product that has not been available in Japan up until now.”

The GCI Systematic Macro Fund was up 19.3 percent this year through July, ranking it fourth among global macro hedge funds for all regions, according to Eurekahedge Pte. It was the best-performing global macro hedge fund in 2014, figures from the Singapore-based data provider showed.

Japan-focused hedge funds were the only ones that had a positive return in August after a downturn in global markets depressed those of its peers worldwide. Eurekahedge’s Japan hedge-fund index gained 0.3 percent last month, bringing its year-to-date return to 5.7 percent, according to the data provider.

The minimum amount required to invest in GCI’s fund is 10,000 yen. That compares with 100,000 yen to invest in a hedge fund by Winton and 3 million yen minimum for a hedge fund managed by Man, according to GCI, Man and Mitsubishi UFJ Morgan Stanley Securities Co., which offers Winton products.

Japanese savings have swelled after more than a decade of declining prices. After Prime Minister Shinzo Abe came to power in December 2012, he vowed to end deflation and the Bank of Japan has since set a target of a 2 percent increase in prices. A rise in consumer prices means that depositors risk seeing the value of their money decline.

That has prompted an increase in mutual funds. Total net assets managed by publicly offered funds surpassed 100 trillion yen for the first time in May, according to Japan’s Investment Trusts Association. The number of funds has risen to 5,600, the highest level since 1997.

GCI, which manages 109.6 billion yen, is also seeing an opportunity due to a lack of variety of investment products that are available for individual investors, Iwashige said.

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