After posting gains of as high as 65% in 2005, hedge funds that invest in Japanese securities are suffering steep declines, The Wall Street Journal reports.

The Whitney New Japan Fund--a hedge fund run by Whitney & Co., one of the biggest, with assets of $1.3 billion as of the end of last year--is down 23% through July, and a counterpart, the Whitney Japan Select Fund, is down 29%.

And the red ink appears to be widely across the board, according to data from Of 104 hedge funds that focus exclusively on Japan, 47 have delivered negative returns through July, 15 have posted positive returns, and the remaining 42 failed to share information--meaning, ostensibly, that 89 of the funds could be in the red.

One of the problems, analysts said, is that hedge fund portfolio managers in Japan invest like mutual fund portfolio managers, holding stocks for rather long periods of time, rather than offsetting their risk by shorting the market.

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