"Demand is really great," Sato said, pointing to Japanese pension funds and regional banks. "It's very similar to a situation in the U.S. around 2005, when money flooded into alternative assets."
Japan's financial giants are looking toward the U.S. as they build out business lines to make better use of their vast balance sheets and relationships with institutional investors in their home country. Last year, Mizuho acquired New York-based investment bank Greenhill & Co. in a $550 million deal to offer more advice on global mergers.
Mizuho is already one of Asia's biggest money managers, according to Thinking Ahead Institute, a trade body representing asset owners. But globally it's still overshadowed by powerhouses such as BlackRock and Apollo Global Management.
The focus on alternatives is part of a broader plan to increase total assets under management to $1 trillion in eight years, Sato said. Much of the firm's asset management business is housed in Asset Management One, a joint venture with insurer Dai-ichi Life Holdings.
Private markets can offer a cushion to institutional investors when inflation and interest rates surge, as they did in recent years, sending prices on stocks and bonds swinging.
Mizuho would rather acquire or team up with companies specialized in private equity and private debt than poaching individual fund managers, Sato said.
The firm is prepared to pay up if it sees the right opportunity in private markets, he said. After all, many firms are targeting that sector — and private credit in particular.
"Private debt houses in the U.S. are in a growth phase, so they are expensive," Sato said. "Still, there are cases in which their valuations can be justified."
In recent weeks, Japan's major banks have rushed to announce growth plans for asset management, responding to the government's campaign to drum up public interest in investment in financial products.
As part of his economic revival plans, Prime Minister Fumio Kishida pitched the industry as a key conduit to mobilize roughly $14.5 trillion in household assets into investments that can fuel the country's productivity and innovation.
Sato predicts companies and households are indeed likely to change longstanding behaviors as deflation comes to an end, as inflation threatens to diminish the value of their cash holdings.
In addition to new client money flow, he expects a surge in Japanese stocks and other asset prices to boost the assets Mizuho manages for customers.
While index funds are a popular vehicle to attract Japanese retail investors, Mizuho aims to build out actively managed funds as a way to differentiate from rivals, Sato said. The bank is readying to offer more interest rate-related investment products given a return of investor appetite for them as the central bank is set to normalize monetary policy, he said.
Japan also lags behind in compensation for fund managers, he said. That's a longstanding issue in a country where an egalitarian workplace culture makes it difficult to lavish rewards on top performers.
The executive, who rose through the ranks as a fund manager and had an earlier stint in Singapore, is hoping acquisitions of foreign companies encourage more drastic changes within the Japanese firm.
"Even if we take a majority stake, we will keep their systems, including compensation, and we will import them here," he said. "They can be a change agent for our culture."