UK-based M&G Investments has decided it is time to build a business development presence in Japan, and is also eyeing expansion in other markets, notably Australia and Korea.
Taro Shiroyama joined this month as managing director of institutional business development from US fund house Pimco. Based in a new office close to that of M&G Real Estate, he reports to Marcel de Bruijckere, Asia-Pacific director of institutional business, based in Singapore.
M&G felt there was enough traction and concrete interest now to justify the hire of Shiroyama and another executive to support him, de Bruijckere told AsianInvestor.
Indeed, Japan’s huge pool of institutional is looking increasingly attractive and accessible to international asset managers, following moves by large retirement schemes – most notably the $1.2 trillion Government Pension Investment Fund – to seek more overseas and alternatives exposure.
A major driver of this is the need to boost yields, which in Japan are among the lowest in a low-yield world, especially after the central bank’s introduction of negative interest rates.
M&G has a small number of institutional clients in Japan now, but also “a healthy pipeline of more concrete discussions”, noted de Bruijckere, who covered the country prior to Shiroyama’s appointment. “It’s not a market we have focused on a great deal previously.”
Asked whether the hire was triggered by M&G winning recent mandates, de Bruijckere said: “Not specifically. It’s more about looking forward – this is obviously a very important and large market.”
Given the progress that M&G has made by visiting large institutional investors and discussing products, it made sense to have a local presence, he noted. “To build deep relationships in a market like Japan you need to be locally based and need someone on ground who speaks the language.”
As for where it sees opportunities, M&G aims to tap what it sees as significant local demand for corporate bonds above all, pointing to its capabilities in European credit in particular.
“Japanese government bonds are not yielding anything and the local credit market is quite limited, so the need to look further afield is obvious,” said de Bruijckere.
But institutions are doing so cautiously, he added. “There is appetite [for yield], but they are looking for very solid credit investments.” They will consider high-yield bonds, but investment grade forms the bulk of allocations to credit, he said.
M&G also sees significant Japanese interest in private debt, such as in European bank loans, real estate finance and infrastructure finance. Local investors are also fairly conservative on this side, where they look at senior loans above all.
Meanwhile, there is a great deal more interest in real estate and infrastructure equity among Japanese institutions than three or four years ago, said de Bruijckere.
One challenge in Japan is the length of time it takes for institutions to pull the trigger on mandates, he noted.
“There is interest to move into new asset classes, such as private equity and real estate, but Japanese institutions are typically very thorough – and rightly so. They take time to gather information from fund managers and elsewhere before they allocate to an asset class and decide who to select."
Asked whether M&G was likely to increase its focus on marketing to distributors and intermediaries in Japan, de Bruijckere said this was not his area. However, he noted that while the new office would focus mainly on institutional business for now, it would provide a platform to further explore retail opportunities down the line.
So where else in Asia might be next on the list for expansion? De Bruijckere said Korea was probably the market where M&G saw most potential for growth after Japan. M&G Investments has clients there, but only M&G Real Estate has an office in Seoul.
He also pointed to Australia as somewhere M&G would spend more time researching the market. The firm has clients there, but the country has not been a major focus so far.
At Pimco, Shiroyama was head of the Tokyo product and solutions team, covering client and consultant relationship management and providing portfolio analysis to institutional investors. He started his career with Goldman Sachs Asset Management in Japan.
M&G established its operation in Asia in 2012 with offices in Singapore and Hong Kong. M&G Real Estate, the firm’s property funds arm, has regional offices in Japan, Korea and Singapore.