Smaller firms are winning pension mandates in Japan despite an overall shrinking value of assets mandated to third-party managers.
According to data compiled by the Japan Pensions Industry Database (JPID), 63 firms have seen their business grow during the fiscal year to March 31, with the biggest gains recorded among smaller players building on mandates won in the past three years.
Two firms enjoyed the greatest growth in asset values, with AUM soaring by more than 700% each: tiny, little-known Stats Investment Management, whose AUM shot up from ¥1.2 billion to ¥9.4 billion ($119 million), and mid-sized Norinchukin Trust & Banking, aka Nochu, whose pension mandates from agricultural cooperatives doubled from 13 to 26, raising its AUM to ¥111.2 billion ($1.4 billion).
A number of firms new to the pensions market recorded among the fastest growth, including Mitsubishi UFJ Morgan Stanley Securities, Finno Wave Investments and UBP Investments. The full list can be viewed at blog ijapicap.com, whose findings are based on filings with the Japan Securities Investment Advisors Association (JSIAA).
“The numbers signal that the business is no longer dominated by bank- or insurance-company owned asset managers,” says Jo McBride, publisher of the JPID, who adds that local giants such as Sumitomo Mitsui Trust Bank saw pension-mandated investments decline by -9.15%, a drop that follows a steeper loss in fiscal year 2010 of -21.15%.
She says the rise of Stats, Finno and other independent asset managers that provide good performance echoes what has already become commonplace in the United States and Britain. Stats, for example, was established in 2005 as an alternative investments provider and is 68%-owned by president Tatsuya Yamashita.
Finno (a contraction of Financial Innovation Wave) is also owned by individuals who set it up in 2005, including chairman and CEO Masao Fujisawa (32%) and president Hideki Wakabayashi (22%). All of these people have long-standing experience at Japanese and foreign securities firms.
The largest independent firm is BFC Asset Management, ranked 12th among managers of pension assets, with 100 corporate pension-fund mandates worth ¥114.4 billion ($1.4 billion). It was founded in 2006 and is 77.5%-owned by president Noriyuki Kawana, formerly of Mitsui Trust Bank and Barclays Global Investors.
However, it's not all been smooth sailing for independents. One of the pioneers in this area, Sparx Asset Management, founded in 1989, has seen pension-sourced AUM decline from a peak of ¥207 billion in 2006 to just ¥37.5 billion this year.
The question for these independents, particularly the small ones, is how they fare in the wake of the AIJ Investments scandal, in which a small, relatively unknown firm selling offshore long/short strategies proved fraudulent.
Industry people in Tokyo say this has led many pension funds to retreat from using small, independent asset managers. That scandal broke in February, so it won’t be until next year’s JSIAA filings that its impact on other players becomes clear.