Just four months old, Asset Management One is already the Asia-Pacific region’s largest manager of funds – an impressive springboard from which to launch new product lines and services and expand overseas.
As of September 30, the company had a combined $497 billion of assets under management, according to AsianInvestor’s new AI100 survey, the results of which are set to be released with the March/April edition of the magazine. So it is ideally placed to champion Japan's rapidly developing fund industry.
Hajime Fukuzawa, managing executive officer and the head of Asset Management One’s global business, told AsianInvestor that the company, which was created from four asset management companies in October, is on the lookout for fund distribution partners in Asia.
“First, we wanted to get critical mass in the Japanese market, which we managed,” he told AsianInvestor. “Now we rank as about the 30th largest asset manager in the world, which is good, but to be more meaningful we need to broaden our market appeal from Japan into Asia.”
Fukuzawa said that this would not be easy, however, noting that Asia’s fund market is already “very competitive”.
As part of Asset Management One’s efforts to expand internationally, Fukuzawa said the company had a number of product initiatives.
“We are looking at [offshore] alternative products such as private equity and infrastructure debt, and secondly we are looking to domestically offer internet services for retail clients, including a global advisory business,” he said.
The asset manager is also looking to roll out a robo advisory service for retail investors, although Fukuzawa said this would take well over a year and the precise timing of launch wasn't yet finalised. Additionally, “we want to provide sophisticated solution products like absolute return and also expand our own products and Ucits overseas,” he said.
Ucits is a structure that can be sold to any investor in the European Union under a harmonised regulatory regime.
Additionally, Asset Management One has established an environmental, social and governance office, staffed by about 10 people, to help offer an ESG overlay to its existing funds and potentially create new ESG-focused products in the future.
The creation of Asset Management One is the result of discussions that began in January 2015 between Mizuho Financial Group and Dai-Ichi Life.
The two ultimately agreed to merge Mizuho Asset Management's and Mizuho Trust Bank’s assets with Diam Co. Ltd and Shinko Asset Management to form a company with 1,200 employees.
Each underlying businesses brought a particular focus. Diam served institutional clients through active and quantitative strategies, while Mizuho Asset Management focused on selling fixed income products to retail investors via Mizuho bank branches. Shinko Asset Management targeted equity funds at retail customers through Mizuho Securities, while Mizuho Trust Bank, which has existed for over 90 years, supplied almost 50% of the new company’s client assets via its institutional accounts.
Full integration, including of IT systems, is anticipated to take two years.
Asset Management One was formed in a deliberate attempt to capitalise on a huge asset shift in Japan. “Our mission is to play a leading role in the further development of the Japanese asset management market,” Fukuzawa said.
Its desire to expand offshore can be seen in this light too. With local bond yields negative or near zero up to the 10-year Japanese government bond – part of the Bank of Japan’s quantitative easing efforts – local institutional and retail investors are having to seek yield elsewhere. Many have chosen to look at offshore fixed income, as well as at US and Australian equities, but retail investors in particular lack experience in doing so.
“Japanese asset management still isn’t that big,” Fukuzawa told AsianInvestor. “Total individual assets here amount to about ¥16 trillion, of which 50% is kept in bank deposits. The trouble is that because we suffered deflation for so many years, many of our younger people [have] never experienced rising prices.”
That is slowly changing, in large part due to the Abenomics of Prime Minister Shinzo Abe's four year-old regime, but it’s a hard mindset to shift. “We have an ageing population and more people need to start building their assets,” he said. “It’s up to us to create good active products for these younger people in particular.”
Asset Management One already boasts some sizeable institutional investor money behind it. The Government Pension Investment Fund, the world’s largest asset owner, had ¥23 trillion ($201.97 billion) in assets at the fund house as of March 2016. These were invested into multiple funds spanning active and passive strategies, and covering both Japanese and global equity and fixed income. Additionally, it has sought to cross-sell 120 products to regional banks since the merger.