Small funds have been bagging big returns on many hot trades this year. We have talked about the outsized returns of bond funds in Greece previously, and now it seems some Japan-focused hedge funds are also beating the high end of returns. Eurekahedge‘s regional index for Japan was up 22.7% until the end of October, whereas the North-American and European indices have gained only 7.3% and 6.9% in the same period.

Hedge Fund Returns by Region

According to Bloomberg’s Bei Hu, Northwest Warrant Fund Ltd. has taken in a gain of +203% through October this year. The $32 million fund mainly invests in convertible bonds, which makes up 80% of the fund’s assets. After selling the fixed income part of the convertibles, the fund can exercise the options to convert securities into stock. George Phillips, CEO of the fund’s parent firm, said there could be significant corporate activity as Japan gets closer to achieving the 2% inflation target and the yen weakens further.

Warrant Fund, managed Northwest Investment Management, netted huge profits from positions in NIPRO CORPORATION (TYO:8086), a medical technology company, and Nidec Corporation (NYSE:NJ), maker of precision motors. Northwest also has position in Takashimaya Company, Limited (TYO:8233), where shares are up 58% YTD.

Japan-focused hedge funds outperform

While the performance of Northwest Warrant is unparalleled, Japan-focused funds are doing much better than their European and American counterparts. Despite of some turbulence in the past months, the Nikkei 225 (INDEXNIKKEI:NI225) has risen 50% in the year, bringing major profits for those who bet on Japanese equities.

Symphony Financial Partners’ SFP Value Realization Fund, which is heavily invested in Japan, returned 56.5% in the first ten months of 2013. The fund manages $250 million and reported a gain of 44% last year. Symphony was founded by David Barana and Kazuhiko Shibata in 2000 and seeks to invest in undervalued, high-quality Japanese equities.

Sloane Robinson’s SR Global Fund Japan, with $110 million under management, has gained 45% through the end of October. The fund is the best performer of the investment management firms. The Japan focused hedge fund is managed by Hugh Sloane and Alex Kydd. SR Global Japan was up 31% in the last year. Japan is one of the major allocations of the long/short funds managed by Sloane Robinson.

United Manager Japan Inc launched Kotoshiro Fund in 2008. The fund is run by Masahiro Koshiba, who is one of the most notable names in the Japanese hedge fund industry. UMJ Kotoshiro has gained 30% YTD, beating many of its competitors.

London-based Henderson Global Investors has a couple of hedge funds that exclusively invest in Japanese equities. Henderson Japan Absolute Return Fund, with $295 million under management, has reported a gain of 17.5% this year. The Henderson’s Alphagen Hokuto Fund has not had similar luck; returns are up only 6% for the year. The fund manages $269 million.

Ortus Capital reports low returns

However there is one fund that has consistently failed to show a positive return throughout the year. Ortus Capital, which manages $130 million in one of its funds is reporting a net loss of 14.5%, according to Hedge Weekly. The fund follows a quant strategy, which trades currencies. Putting Ortus Capital’s strategy in perspective, it is no wonder that it is not showing a return.

Marathon Vertex Japan Fund is up 17.4% for the year after losing 1% in October. The fund is managed by William Arah and overlooks $450 million. John Paul Temperley’s Martin Currie Japan Fund is up 24% YTD, the fund manages $187 million.

Equilibria Japan Fund netted a gain of 19.3% through 25th October this year whereas George Long’s LIM Japan Fund is up 10.3% YTD.