Barclays Global Investors has become the dominant manager of Japanese defined-benefit pension funds, with more assets under management than the next three-biggest fund managers combined.

According to Hong Kong-based Japan Pensions Industry Database (JPID), an analysis of annual returns filed with the Japan Securities Investment Advisers Association by its member firms shows BGI now runs Ñ15.6 trillion ($145 billion) of Japanese DB assets. The next three biggest players, Nomura Asset Management, Diam and Tokio Marine Asset Management, manage another Ñ12.4 trillion ($116 billion) between them. These figures are as of March 31, 2008.

The next six managers are, in order, BlackRock, Morgan Stanley Asset & Investment Trust, Sumitomo Trust & Banking, DaiwaSB Investments, Nissay Asset Management and Sumitomo Mitsui Asset Management. JPIDÆs survey ranks the top 25 managers by AUM.

In terms of number of DB pension mandates, Nissay has the most, with 423, followed by BGI (381), Sumitomo Mitsui AM (314), Nomura AM (295) and DaiwaSB (229). Although some firms have experienced marked increases or decreases in the number of mandates, by far the biggest change is BGI, whose number of mandates rose by 160% over the course of 2008. This is because it absorbed the pensions managed by the now-defunct Barclays Trust & Banking, giving the firm a large one-time gain.

Jo McBride, managing director of Asian Agenda International, a Hong Kong-based consultancy which publishes the JPID, says a number of factors are reshaping the pensions industry, which will likely cause big changes to these manager rankings.

First: more domestic trust banks, which handle both investments and custody for pension plans, are joining the JSIAA alongside their asset-management subsidiaries. In the past year, Sumitomo T&B and Mizuho T&B have entered the data set, squeezing out some other asset managers.

If Mitsubishi UFJ Trust & Banking, the biggest in Japan, joins the JSIAA, it could upset BGI and Nomura for top ranking. Chuo Mitsui Asset Trust & Banking has also yet to join, which could threaten managers toward the lower end of the JPIDÆs top-25 list, such as Capital International, Fidelity Investments and UBS Global Asset Management, says McBride.

Second: The structure of the pensions industry keeps changing. DB plans are taking on more risk and moving out of Japanese equities in favour of domestic and international hedge funds and real estate. So the type of managers they seek will change.

Another upset will come once the government breaks up the Government Pension Investment Fund, JapanÆs biggest public fund with Ñ85 trillion ($792 billion) under management, plus another Ñ30 trillion in low-yielding bonds earmarked for off-budget government spending projects. Politicians want the GPIF split into several entities that will compete amongst one another for better returns, and this will dramatically change the opportunity set among JapanÆs fund managers. BGI is a major manager of GPIFÆs current portfolio, which is weighed heavily to passive mandates.

Third: Other pension arrangements will change. The tens of thousands of so-called ætax-qualifiedÆ employee pension schemes, which belong mostly to small firms whose investments are pooled and managed by life companies, must convert into DB or DC plans by 31 March 2011. And the government may look to tweak the generous pension arrangements for local, prefectural and national government employees, which are currently managed by their Mutual Aid Associations, and some of which are underfunded.