Hedge fund founder takes on Abe

Jamie Rosenwald says investors who are chasing quick handouts are missing the point

Jamie Rosenwald, who’s been buying Japanese shares since 1972, says shortsighted activists are failing to make the most of one of the biggest opportunities for investors in decades.

Prime Minister Shinzo Abe’s governance overhaul is about getting executives to invest excess capital, not just give it back to shareholders, says the co-founder of the $3.3 billion (Dh12 billion) Dalton Investments.

Rosenwald picked his first Japan stocks as a teenager working with his grandfather, a disciple of the famous value investor Benjamin Graham. Rosenwald, who now has more than $1 billion in Japanese equities, says Abe is inspiring one of the most promising changes in how businesses are run since the collapse of the bubble economy, and investors chasing quick handouts are missing the point.

“Over the past 25 years there have been very few times — I can count them all on one hand — where I felt we had a tailwind,” Rosenwald, 57, said in a phone interview from Los Angeles. Some investors have “interpreted the corporate governance scheme simply as the ability for managements to return cash to you,” he said. “It’s awfully sad as a shareholder if all you want is somebody to return the cash.”

Since returning to power in 2012, Abe has revamped rules for shareholders and companies as he enlists investors to press firms to make better use of funds. Activists from Daniel Loeb to Yoshiaki Murakami have seen an opportunity and started to demand bigger dividends and more share buy-backs.

Dalton prefers companies that invest their capital, Rosenwald says. His funds, which take both long and short positions, only buy cheap businesses. Rosenwald looks after Dalton’s Asian equity investments, which make up about $2.5 billion of the company’s assets.

Sensex (IN)