The hostile bidding on two Japanese companies by a U.S.-based hedge fund may trigger other investors to try and do the same, according to hedge fund managers speaking at a New York press conference Thursday, Reuters reports.

Steel Partners Japan Strategic Fund unsuccessfully attempted to purchase Japan-based Yushiro Chemical Industry and also textile firm Sotoh, but the idea that they even attempted it may have begun a trend, managers said.

Though unsuccessful, Steel Partners’ bids helped smack Yushiro Chemical’s price up substantially, even in a land where hostile bids are uncommon.

"A bomb has gone off in the Japanese market and the ripple effect will be felt for years to come," said James Rosenwald, a partner in Los Angeles-based hedge fund firm Dalton Investments.

Though Yushiro and Sotoh are relatively smaller companies, Berens Capital Management partner Timothy Schilt said the trend would widen to companies of all sizes.

"These are small companies, but I think the trend has started and it’s only a matter of time before t passes on to larger companies," said Schilt.

In the United States, hedge funds suffered through a rough year, triggered by New York Attorney General Eliot Spitzer’s probe that began with a $40 million settlement by New Jersey-based hedge fund giant Canary Capital.

According to Chicago-based Hedge Fund Research Inc., the industry suffered $1.8 billion in outflows in 2003, losing half of its total assets. Most of the outflows poured out in the fourth quarter, after Spitzer’s settlement with Canary.

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