JapanÆs DLIBJ Asset Management (Diam), which manages nearly $100 billion of assets, plans to open an office in Hong Kong this spring, says Hiroki Yamada, deputy president.

The initial purpose of the office will be to manage Asia ex-Japan funds. The firm already manages China and India products from Tokyo but believes it can boost performance and improve its marketing to Japanese clients if it ships this function overseas.

Yamada says the firm has decided which executive to transfer to Hong Kong but it hasnÆt announced this. It is getting the requisite licenses from Hong KongÆs regulators and is also applying to Beijing to be a qualified foreign institutional investor.

Other Japanese firms are already active in continental Asia: DaiwaSB Investments has offices in Hong Kong and Singapore, and is 10% owned by AmericaÆs T. Rowe Price Asset Management; Nikko Asset Management has a sales presence in Singapore, a partnership with ChinaÆs Rongtong Fund Management and a new JV in India with Ambit; and Nomura Asset Management, which has long had offices in Hong Kong and Singapore, has just opened in Kuala Lumpur. Nikko and Nomura also have QFII licenses in China.

But Diam has been able to successfully market offshore products that it manages itself, including a fixed-income product, unique in Japan, that focuses on the Australia, Canada, New Zealand and Norway markets. It also manages a China fund and a global fund of Reits.

Diam may differentiate its Asia products with a special focus on Vietnam. Yamada says he is visiting the country in March, noting that many Japanese manufacturers are shifting production there. He notes that China, India and Bric funds have been hits in Japan, and believes Vietnam could be the next exciting story.

Although the initial purpose of the Hong Kong office is to develop investment products for Japanese clients, Diam will also roll out service capabilities for clients in Asia ex-Japan û just as it has done for European clients.

The firm is in a hurry to get more Asia products in the market. JapanÆs baby boomer generation is now beginning to retire, and firms that can demonstrate consistent returns in higher-yielding products can get a piece of the action.

It has developed its own global bond expertise and quantitative equity capabilities, but has struggled to provide good active equity products for most international markets. Although Diam realises it cannot compete against foreign houses in areas like US or European equities û it will need partners for that û it believes it can improve its stock-picking abilities in Asia.

The February 2007 edition of AsianInvestor magazine will provide an in-depth analysis of the Japanese mutual funds industry.