Sun, Mar 29, 2020
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Japanese firms are increasingly awarding investment mandates to foreign managers

Monday, January 27, 2014
Opalesque Industry Update - Myriad changes--macro and micro--support a Japanese institutional move to award mandates to foreign managers. Sub-advised funds accounted for 65% of investment trust assets under management at June 30, 2013, up from 61% in 2008, according a joint report from Cerulli Associates and Nomura Research Institute, Ltd (NRI) entitled Asset Management in Japan 2013: Opportunities and Challenges for Foreign Managers.

The report is the inaugural result of the collaboration by Cerulli Associates, a global analytics firm specializing in asset management and distribution trends, and NRI, a leading provider of consulting services and system solutions.

Sub-advisory arrangements can take two basic forms, either in a discretionary mandate (¥12.4 trillion, US$126.5 billion, as of June 30, 2013), or a fund of funds brief (¥15.0 trillion). Hybrid arrangements account for another ¥12.1 trillion assets under management (AUM). The sub-advisory market offers ample opportunities for foreign managers, particularly in areas like foreign equity and foreign real estate investment trusts where sub-advised funds account for more than 90% of AUM.

"Gradual diversification of Japanese banks' portfolios from Japanese Government Bond (JGB) to foreign securities and changes to pension fund governance spell greater opportunities for foreign managers," said Yoon Ng, Asia Research Director at Cerulli Associates. "The strongest interest for advisory products will come from asset classes like foreign fixed income and foreign equity, followed by emerging markets.”

"Foreign managers wanting to break into the Japanese market as a sub-advisor should target their sales activities at major investment trust companies as well as pension funds," said Sadayuki Horie, Senior Researcher at NRI. "Pension funds have started increasing their use of foreign managers, even for those without a local physical presence. It is crucial for foreign managers to ensure that these institutions are aware of where their expertise lies as they are on the lookout for distinctive asset managers from around the world.”

Key observations from the report on the Japanese investor landscape include:

- Japan's pension funds are the country's largest institutional investor bloc with total assets of ¥277 trillion, as of March 31, 2013.
- Financial institutions' securities holdings, which totaled ¥823 trillion as of March 31, 2013, were predominantly domestic government bonds.
- Changes to securities taxation will encourage growth in the investing class, increasing demand for new products and outsourcing opportunities.
- Foreign asset managers must comply with highly idiosyncratic Japanese business processes and provide superior service to their clients.
- As Japanese asset managers are increasingly outsourcing back-office functions to cut costs, foreign managers that embrace business process outsourcing (BPO) are better positioned to win new business.
- The reform plan of the Government Pension Investment Fund could have substantial impact on public pension fund business and increase demand for high alpha products & alternative investment products.

Press release

www.cerulli.com

Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. PE/VC: Unicorns sometimes sting, Private equity at crossroads as rout offers deals, curbs lending, S&P survey shows sagging prospects for private equity[more]

    Unicorns sometimes sting From PIonline.com: Venture capital firms are on a roll. Some 259 U.S. venture capital funds amassed $46.3 billion in 2019, the second highest by amount of capital raised and number of funds since 2006, according to the PitchBook-NVCA Venture Monitor. The biggest f

  2. Study: Three threats to hedge funds, Institutions seeing more private credit risks[more]

    Three threats to hedge funds From All About Alpha: A recent paper by a scholar at Tilburg University and a market participant at Robeco outlines the difficulties that the hedge fund industry has faced over the last decade. These problems arose, at least in part, from the democratization o

  3. Hedge fund Solus to close flagship investment vehicle[more]

    From FT: Solus Alternative Asset Management, one of the best known specialists in distressed investments, is closing its flagship fund after suffering a combination of heavy redemptions and poor performance. The hedge fund, which as recently as November managed $4.3bn in assets, is one of the fi

  4. Coronavirus 'possibly the biggest economic event of all our lifetimes', 'Big short' Michael Burry has a bearish bet and warns of a selling stampede, Investors' Black Death fear driving panic, says Witan Investment Trust chief Andrew Bell[more]

    Coronavirus 'possibly the biggest economic event of all our lifetimes' A former macro fund manager said on Thursday that the economic impact of the coronavirus - which is shaving trillions off the stock market and exerting a domino effect on the world economy - might be even worse than th

  5. Investing: As markets plunge, short sellers make hay, Time to buy, says GMO[more]

    As markets plunge, short sellers make hay From Institutional Investor: Short sellers floundered during the bull market. But as the market tides have turned, so too have their fortunes. "Some people haven't invested in hedge funds for a very long time," said Mark Roberts, owner of sh