Activist fund managers, never a numerous bunch, are in danger of becoming an endangered species in Japan. The country’s most famous activist fund could face a wave of redemptions after Yoshiaki Murakami, the founder, was arrested on alleged insider dealing charges this month. Now Steel Partners, which annoyed the Japanese establishment by scooping up stakes in undervalued companies and pressing for change, is also under stress. This month half the Japanese outfit’s team quit – only weeks after presenting strategic plans to investors.

Clearly, it is a tough climate. The concept of shareholder value is far from universally accepted and investors are often reluctant to rock the boat. Japan Inc is particularly hostile to corporate raiders: the government introduced poison pills last year, partly to stave off “greenmailers” – in which context it referred to a bid by Steel Partners. To be fair, some of the distrust is deserved. As demonstrated by Mr Murakami’s admission of inadvertent insider trading, activist fund managers often operate in rather grey areas. In Japan, where the rulebook is sketchy, that leaves ample scope for dubious tactics.

But there are also technical issues. The funds are victims of their own success. Mr Murakami’s fund has $4bn under management; Steel Partners has $3.4bn in its Japanese fund. That makes it far harder to produce the sort of returns investors have received in the past. Investors in Steel Partners’ Japan fund, according to a recent presentation, have seen their money more than double, net of fees, since the fund began four years ago, substantially outperforming the benchmark Topix index. In the 12 months to April, however, it produced net returns of 25 per cent, well below the 40 per cent (in $ terms) gain on Topix. Clearly time to duck below the radar screen.

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