Whilst reports of their impending extinction are over-blown, it has been a year of famine for Japanese hedge funds. Finding indigenous Japanese hedge fund managers in the wild is incredibly taxing.

In their natural habitat, they are reclusive, and this follows through into their captive state, such as on stage at the Tokyo Hedge funds world Conference. Luckily, the troop of hedge managers at the emerging managers` showcase are happy to be heard.

"There`s been bad news and data fixation in the second half, the grass seemed greener elsewhere and investors left, but I think we`ll get a tailwind next year, alpha opportunities in the first half followed up with beta," says Shintaro Tomita, ex-Goldman Sachs sell-side trader and now CEO of new hedge fund Bluebear Investment Managers. "Before starting a hedge fund, I only had broker experience, Perhaps I wasn`t smart enough to be an analyst, but I loved trading, day and night. So does my partner, we love equity. We`re very good at trading."

One is not sparing his modest blushes there, but this is exactly what people, certainly international investors, want to hear from a Japanese manager; a bit of passion.

Otherwise there is still a sense that the industry is wracked by a level of unnecessary self-doubt. Not tanking the tough issues, and asking refreshingly difficult questions was Goro Ohwada, CIO of Aino Investment Group. `Many say there aren`t many Japanese hedge funds, but five years ago there were hardly any. Yet should hedge funds even be here? Some say that that the Japanese market is not suitable for hedge funds.`

Masakuni Fujiwara, the CEO of Vistamax Fund advisors has thirty years experience of the markets. He is one of the first generation of Japanese hedge fund managers, (as opposed to Tomita-San who is classified here as Generation 3.5). He runs a long/short Japanese equity fund and long/short foreign equity fund.

"Perhaps this market isn`t suitable for hedge funds. Of course its been the most bearish market this year, and hedge funds prefer bullish markets. Domestic demand is weak here, I expect a big sell-off and a consequent rebound."

This is where in Japan things get `Lost in Translation`, (to quote the nuanced Sofia Coppola Oscar-winning movie, of which we all think quite presumptuously, `I could have written that screenplay`)

It is lost in translation, because the Japanese alpha males of hedge funds do not think Japan is congenitally unsuitable for hedge funds, but just that right now the prevailing market is hairy. Yet, even that is a zen riddle, because this kind of market is precisely where a hedge fund should do far better than a long only manager. The sound of one-hand-clapping fills the auditorium.

"2006 was a good year, but not 2007, we have just had to live with the difficult conditions of the year," says Park West Investment`s Tad Fukushima. "I think there are short side opportunities, because there are many poorly managed companies.I think i`m good at identifying weak and weakening sectors. Capital won`t come back quickly but I think it will come back, selectively, starting with the blue chips."

People are emerging from Wall Street companies and being encouraged by their clients to start their own fund. They are getting the confidence from those investors to try to make a go of it. Numbered amongst them is another `Generation 3.5` arrival, Hidematsu Take, the CEO of Epic Partners Investments. He was formerly a proprietary trader at UBS Securities and now runs a Japanese equity market neutral fund that has never experienced a down month.

"Some investors asked me to set up my own company, so I did, two years ago,` says Take. "The fees I can receive are reasonable, and I can borrow stocks easily. Prop trading skills seem to lend themselves well to starting a Japanese hedge fund. I`m afraid the market expansionary phase is coming to an end and returns in the second half are dwindling, but that gives us opportunities."

Every single rebound in Japan leads to a flurry of media articles insisting that this time it is the real, permanent, non-cyclical, sustainable recovery. (The same hyperbole that India is currently witnessing). Of course it never is the case. Yet, the stoic Japanese hedge funds are still clinging to their perch, and theoretically are best placed to take advantage of Japanese volatility. So international investors would do well to keep them in their viewfinder.