The various twists and turns of Abenomics are not making everyone happy. Except for a few contrarian funds, hedge funds have been taking heavy losses on Japanese investments this year. Not only is the Nikkei 225 stock index down 11% for the year, the Japanese yen, which most were betting against, has appreciated a solid 3% versus the U.S. dollar in 2014.

Japan hedge funds

These trends in Japan markets have resulted in significant losses for most Japan-focused hedge funds in the first quarter. According to research firm Simplify, the average Japanese stock-focused hedge fund dropped around 5.75% in Q1 this year.

Hedge funds unfazed by the recent losses in Japan

Hedge fund managers, however, seem unfazed by the relatively large recent losses. An April survey of Asia-focused investment managers by Bank of America Merrill Lynch highlighted the fact that there had been “minimal change” in Japanese investment positions over the last month, with exposure to Japan only dropping by around 3% from March to April. In fact, short positions on the yen have even increased somewhat over the last 30 days.

Fund manager comments

Eton Park Capital Management, led by Eric Mindich, manages $9.67 billion in investor funds and remains bullish on Japan.

“We continue to be very positive on our positions in Japan. We believe in the company-specific stories and industry dynamics of the stocks we own and feel that their valuations are attractive on both an absolute and relative basis,” read an April 15th letter from Eton Park to investors. The letter also unabashedly pointed out that Japan markets were the firm’s primary focus.

The letter highlighted the importance of a management focus on creating shareholder value. “Additionally, we have seen that strong management and leadership can really drive change and create shareholder value in Japan, a dynamic that we feel is sometimes underestimated by the market.”

London-based Eclectica Asset Management is headed up by Hugh Hendry. Japan currently represents almost 30% of the $427-million fund’s portfolio, and equity investments in Japanese real estate and stock indexes resulted in a 0.6% loss the first quarter, based on a letter sent to investors. The letter continued to say the fund’s long-standing thesis that “radical monetary policy will lead to an upside acceleration in Japanese equity markets” remains intact.