Japan¡¯s mega-fund for universities has finished its first fiscal year in the red, causing concern over whether the?high-stakes initiative?can deliver a return on investment.

The fund, which is worth a total of ?10?trillion (?55?billion), posted a deficit of ?60.4 million, The Nikkei . It¡¯s a lacklustre start for the initiative, approved by Japan¡¯s government in 2022 with the hope of jumpstarting innovation and?boosting the nation¡¯s performance?in global university rankings.

Designed to create ¡°International Research Universities of Excellence¡±, the fund is expected to generate roughly ?300?billion in annual profits from 2024. Each year, ?20?billion will go into student support, with the remaining ?280 billion invested in a handful of universities, which will be selected on a competitive basis and should be announced in autumn.?

But the fund¡¯s early performance has raised concern among some scholars, who note that the strings-attached model could make it unsustainable for participating institutions.

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Aki Tonami, an associate professor of international relations and economics at the University of Tsukuba, said she worried about the fund¡¯s future, adding that many experts had previously warned the government about poor performance.

She noted that, if an investment bank managing the fund charged a 1 per cent commission, it meant that ?100 billion of Japanese taxpayers¡¯ money had ¡°already evaporated¡±.

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Even without this setback, the stakes are high for participating institutions to succeed. Critically, they must register at least 3 per cent growth in the value of their research activities over five years, something Dr Tonami said?¡°isn¡¯t an easy task even for many Japanese companies, let alone state-funded universities¡±.?

¡°In Japan, we call this type of funding with many strings attached doku manju ¨C poisoned red bean cake,¡± she said.

Dr Tonami said she thought that universities¡¯ decisions on whether to participate would depend on ¡°how desperate they are to survive¡±.

Masami Iwata, a sociologist and professor emeritus at Japan Women¡¯s University, noted there would be a learning curve for most institutions, with ¡°extremely little experience¡± of fundraising in Japan¡¯s higher education sector.

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¡°It seems particularly difficult for the former national universities, which are now in a hurry to invite experts to work on financial technology,¡± she said.

Philip Altbach, a professor of higher education at Boston College, said the approach of relying on stocks to back the scheme was atypical, and perhaps precarious.

¡°We did a study recently of eight of the big ¡®excellence¡¯ projects done around the world in recent years and none relied on the unpredictable returns on investments ¨C all were funded directly by governments,¡± he said.

Yet, despite the risks involved and the fund¡¯s recent performance, academics speaking with?Times Higher Education?doubted that competing universities would reconsider applying.

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Akira Mori, a scholar at the Research Center for Advanced Science and Technology at the University of Tokyo, said that, after all, the fund was still an ¡°unprecedented opportunity¡± in Japan.

But he hinted that the initiative thus left far more to be desired. ¡°We just hope the government?will steer our path in a more desirable direction, in terms of the bond management itself and funding allocations across?the country,¡± he said.

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pola.lem@timeshighereducation.com