Mark O’Friel Shares His Insights on Japan

We are pleased to share with you our conversation with Mark O’Friel, managing partner of MOF Capital, an alternative investment fund focused on investments in Japan and China.

Prior to starting MOF Capital, Mark O’Friel was with Steel Partners Japan G.K. as Managing Director and head of the Tokyo office in 2008 and 2009. Previously, O’Friel jointly led Morgan Stanley’s U.S. proprietary trading business in North America from 2002 to 2005. There he directed a multi-strategy long short group with two quantitative market neutral portfolios and six sector long short portfolios. O’Friel formerly directed Morgan Stanley’s Equity Division in Japan, acting as both senior equity risk manager and as a member of the firm’s Global Equity Operating Committee from 1996 to 2002. Under his leadership, Morgan Stanley achieved leading market share in the Japanese equity market and received Institutional Investor’s top ranking for equity research in Japan. Mr. O’Friel began his career in Japan as a market strategist for Sanyo Securities. He is a graduate of Harvard College.

MOI Global: Mark, thank you for taking the time to discuss Japan at this pivotal moment in the country’s recent history.

Mark O’Friel: Thank you for the opportunity to speak with you about Japan. The country has just experienced a tragedy that goes beyond words, with 25,000 people dead or missing. The pictures of the earthquake and ensuing tsunami damage are heart rendering. The resilience that the Japanese of Tohoku have shown in the face of this event is a profound statement to the strength of the national character. The best of Japan is on display throughout the country.

What is overlooked in the reports and pictures of the disaster is in fact how well prepared Japan was and how the damage was minimized. The earthquake itself, despite its unprecedented size, caused relatively little damage. Even near the epicenter, collapsed buildings and deaths were few. This is after a main earthquake of 9.0 and over 800 aftershocks greater than 4.5.

The before and after satellite pictures now available on the web are testimony to the power of nature. The pictures now and the pictures one, five and ten years from now will be testimony to the speed and efficiency of how Japan can rebuild physical infrastructure. Japan has a long history of rebuilding, from the aftermath of World War II to the Kobe earthquake. Despite high levels of government debt, the government actually has quite a bit of leeway. Ten-year JGBs have remained quite strong.

The earthquake and its aftermath will not be a catalyst for change in Japan. The government, corporate Japan and its population will seek to draw on the traditional strengths of discipline, perseverance, hard work and self sacrifice.

MOI: You have spent the major part of your career in Japan. Tell us a little about your background and what motivated you to work in Japan.

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