Tokyo's Nikko Group expanded its global horizons with the April 1 launch of international money manager Nikko Global Asset Management in London.
The new firm's charge is essentially two-fold: to fortify Nikko's global investment capability for Japanese customers and to help attract additional non-Japanese clients.
NGM is essentially a 50%-50% joint venture between Tokyo's Nikko International Capital Management Co. and Nikko Investment Trust. Legally, it replaces the foreign components of NICAM and NIT.
The move is unusual for a Japanese manager and is slightly bucking the trend toward focusing on protecting domestic turf amid the onslaught of foreign competition at home, an expert said.
But Nikko's moves are meant to address the competition, officials say. In Japan alone, interest in foreign investing is on the rise, in part because of deregulation. Moreover, some big competitors, especially outside Japan, have been expanding their global visions, encouraging Nikko to strengthen its existing foreign presences and be more clearly seen as "global."
All this comes at a time when the Japanese and other Asian markets are looking risky. As concerns about Asia rise, some experts think Nikko needs to seem more global in perspective, rather than be pigeon-holed as a regional Asian player.
At the same time, a merger between two units should increase efficiencies, said consultant Barry Gillman, president of Farris, Gillman & Associates, Fort Lee, N.J. In his view, Nikko is in the "front of a wave of Japanese firms bringing various operations together."
Nikko also appears sensitive to the trend toward and implications of megamergers.
It's clear that "powerful firms are getting more powerful," said Masafumi Hikima, chief investment strategist and chief of international operations for NICAM in Tokyo.
"Certainly, we have to compete with the powerful global houses. We (already) have this huge asset base in Japan, including institutional and retail money that will (enhance) our asset management capability. And in the end . . . those companies with a huge money base will be the ones that grow."
What exactly has Nikko created? An asset management company based in London with offices in New York, Hong Kong and Singapore. CEO Tony Thomson was hired in September from London's Foreign & Colonial Emerging Markets Ltd.
While the firm officially began April 1 with $6.5 billion under management, that figure may rise to roughly $12 billion to $13 billion by March 31, Mr. Hikima estimated.
Over the next six months, NGM will gradually become the manager of the majority of international equity holdings of Japanese pension fund clients. On the retail side, NGM will serve as an investment adviser to NIT. However, because deregulation -- which would allow Japanese-sourced retail assets to be invested abroad -- is expected sometime late this fall, NGM should eventually manage these NIT global assets as well.
"We currently intend that NGM will be adviser for approximately $500 million of global (retail) funds," Mr. Hikima said. "But from December on, it will manage these funds on a discretionary basis." It will also manage new global funds that are expected to be launched, he said.
The new firm has a five-member board that sets managerial policies and an international investment committee that sets investment strategy. Meeting quarterly, the investment committee creates a strategy designed for dollar-based investors; it then tailors this view to fit the needs of individual clients around the world. After broad strategy is set, regional NGM offices choose investments in their areas.
NGM is expected to eventually handle the global bond investments of its Japanese parents; but once that occurs, it's not clear whether these assets will also be locally managed or handled just by NGM-U.K. The London unit now manages all the global bond allocations of its non-Japanese clients, Mr. Hikima said.
What specific attractions does NGM offer? The firm's CEO cited the availability of a large amount of resources, given the joint ownership by NICAM and NIT; and the addition of about nine more people than NICAM's previous overseas investment personnel offered.
(However, total head count will be lower than the combined total of the previous separate international arms of NICAM and NIT because a number of overseas NIT employees returned to Japan with the creation of NGM.)
Another attraction is NGM's investment style, Mr. Thomson said. While it is a blend of quantitative and qualitative/judgmental decisions, he said, "we are making much more extensive use of risk controls and quantitative methods than most other Japanese fund managers are. The advantage is that you can do a better job that way. You have better tools to control risk."
Overall, the firm has a "big focus on risk control, using variations of BARRA (technology) with proprietary features."
