UK-based Standard Life Investments has become the latest fund house to have set up an office in Tokyo to tap growing opportunities among local investors, having obtained an advisory and agency licence in mid-April.
SLI’s new 11-strong team is the first step towards building a franchise in Japan, and the firm is also eyeing a discretionary investment licence, newly appointed Japan chief executive Neil Slater told AsianInvestor.
The team in Tokyo is mainly focused on products and client servicing, and the firm continues to hire, with a focus on key areas such as sales, said Slater, previously a fund manager in SLI’s global real estate team in Edinburgh. There are no current plans to bring in investment staff, but this might form part of a longer-term strategy.
In addition, Mikifumi Watanabe has been named as vice chairman for Japan, reporting to Slater. Watanabe joined the company as a senior adviser in 2015.
SLI opened the branch in response to client demand and the desire to build its franchise in Japan as part of its international expansion, noted Slater, who reports to Colin Clark, London-based head of the global client group. “We are building a sustainable asset management business in Japan and nothing is off the table,” added Slater.
Most asset managers in Japan have a discretionary investment licence and/or type 1 securities licence, noted Slater. SLI does not yet have either of these, but a likely next step is to seek approval for the former. He did not specifically mention whether a securities licence was part of the firm's ambitions.
A discretionary investment licence allows managers to market directly to pension funds, which in Japan is considered a retail business, and to manage institutional mandates.
Japan’s huge pool of institutional capital is looking increasingly attractive to foreign asset managers, following moves by corporate and state 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.
Indeed, another UK manager, M&G Investments, has just hired its first Japan head of institutional business and opened another branch to add to M&G Real Estate’s existing presence there, as reported yesterday.
Prior to setting up the new office, SLI has had a small presence in Japan for five years through its strategic alliance with Sumitomo Mitsui Trust Bank covering distribution and investment. SLI manages global equity funds for Sumitomo, while the latter manages Japanese equities for SLI. The partnership remains an important component of the firm’s strategy, Slater said.
SLI retains several secondees in the Sumitomo office, focusing on client servicing and providing product support. Likewise, Sumitomo has secondees in SLI’s headquarters in Edinburgh on both the product and investment side.
Asked about investment demand from Japan, SLI’s Slater said clients were looking at private markets, global credit, multi-asset and focused equity strategies. This was echoed by speakers at AsianInvestor’s Investment Forum in Japan last month, as reported.
Meanwhile, the firm is readying a global multi-asset growth strategy in Sicav format for launch in the second quarter, and is also considering launching a balanced fund focused on Asia, as reported.
SLI manages $373 billion globally, of which Asia Pacific accounted for $15.2 billion (4%) at the end of 2015.