State Street prices mandates for onshore funds in Japan

The US firm is the first foreign fund-admin provider to calculate net asset values for onshore clients in the country.

State Street Trust & Banking has achieved a coup in the domestic fund-administration market in Japan by becoming the first foreign firm to price mandates for onshore investment managers.

The bank quietly gained its first onshore fund-admin client in February 2009 and since then has secured two more. And it expects to sign two further clients by the end of the year, says Tokyo-based Andrew Erickson, president at State Street Trust & Banking.

The company has only now spoken publicly about its business activities in this area as it wanted to make sure the operating systems were foolproof, he says.

State Street calculates daily net asset values (NAVs) of about 400 funds valued at $80 billion to $100 billion and is the only foreign firm conducting daily accounting of onshore funds and pricing them daily in this capacity. 

"Right up until it went live, everyone said it couldn't be done," says Erickson. "No one believed we could get clients or they would come to us."

But they have. Erickson would not name any, but says they are all well-known foreign investment managers with a sizeable investment trust management (ITM) business in Japan. ITMs are the Japanese equivalent of mutual funds.

In Japan, both fund managers and trustees calculate NAV at the day's end and compare it to the yen.

However, given the small revenues on offer, why is State Street getting into the fund-admin business? "It is what clients want," says Erickson. "They have been saying to us for years, 'Please do this in Japan,' and we have because it adds value."

Some industry commentators suggest State Street's strategy is to move into fund admin as a way of expanding other areas of its business in Japan.

State Street has maintained a presence in Japan since the 1990s and continues to operate as a trustee while other foreign firms have exited.

Since 2000, the Japanese market has turned on its head completely, says Erickson. All the foreign players used to have domestic trust banks -- now they have either become investment managers or provide pure custody.

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