Several leading U.S. and European money managers recently have set up shop or added to staff in Tokyo to chase Japanese pension plan assets or run Japanese equity portfolios.
The list of new and recent arrivals features some of the leading active international managers, including Bank of Ireland, GE, ABN AMRO, Putnam and UBS Brinson.
Their moves bring to about 60 the non-Japanese managers that have licenses to do business in Japan, with many in joint ventures or partnerships to run funds or act as advisers.
Japan had $1.2 trillion in pension assets last year, according to InterSec Research Corp. in Stamford, Conn. Foreign money managers had a 28% share of the investment adviser market, up from 13% in 1996, according to an InterSec client memo.
Bank of Ireland Asset Management Co. opened a four-person office in Tokyo in December and is going after defined benefit clients with its new unit, Bank of Ireland Asset Management Japan Ltd., which so far has no Japanese pension clients.
GE Asset Management Japan Co., a subsidiary of GE Financial Assurance, opened for business in September and so far has signed up eight Japanese corporate pension plans that have committed a total of $200 million in international equity assets.
ABN AMRO NV, which moved its Japanese equity portfolio manager to Tokyo from Hong Kong last year, also has created a 15-person sales and marketing staff to develop pension business.
Putnam Investments in April bought a 10% stake in Tokyo-based Nissay Asset Management Corp., which has close to $13 billion in assets under management.
And UBS Brinson/Brinson Partners moved its seven-person Japanese equity team to Tokyo from Chicago this winter.
Most recently, money managers have touted the expected dawn of Japan's defined contribution market.
But legislation has crawled through government ministries en route to the Japanese Parliament. Many are guessing the earliest legislative change will not occur before the end of the year.
But these managers' moves were made to grab Japanese pension funds' defined benefit assets now.
Converging trends
Both local and global trends led Bank of Ireland to Japan. "There's growing investment management business in Japan. The market's deregulating," said Denis Donovan, Dublin-based chief operating officer for Bank of Ireland Asset Management International. "The competition has seen fit to establish there recently. Some have seen very early successes and we're impressed by that."
Consultants also are gaining ground with Japanese pension funds. "The global consulting community is gaining share in the Japanese marketplace, and they know what we are doing," Mr. Donovan said.
Another reason for the move was Bank of Ireland's global, blue-chip client list of companies.
U.S. corporate clients such as Shell Oil Co. and Pfizer Inc. "all have pension plans for people in Japan as well," said Denis Curran, president of Bank of Ireland Asset Management (U.S.) Ltd., Greenwich, Conn. The firm has its eye on that business as well.
Kikuo Kuroiwa, most recently with Ernst & Young Consulting Japan, is chief executive of the fledgling Bank of Ireland Asset Management Japan Ltd. The office has three Japanese and one Irish staffer. The company is still recruiting Japanese marketing and client service people, Mr. Donovan said.
The new group will try to sell global ex-Japan bond and equity portfolios to Japanese pension funds. Portfolios will be managed in Dublin.
GE gains
Last year was busy for GE in Japan. It gained its foothold in the pension market with the $1.9 billion acquisition of Toho Life, which became GE Edison Life Insurance. Along with offering traditional types of insurance, Toho had sold guaranteed investment contracts to pension funds, said Michael Cosgrove, a president with GE Investment Services Group.
In another move, GE Asset Management Japan "hung out its shingle in September and began to solicit clients," he said. The new asset manager offers a variety of management styles to institutions, but is "heavy on the equity side."
He declined to name the eight Japanese corporate pension plans that have signed up so far.
GE Asset Management Japan moved a portfolio manager to Tokyo and hired three local analysts, he said.
Open for business
The Dutch ABN AMRO Bank last year opened its Japanese subsidiary, ABN AMRO Asset Management Japan KK.
Along with chasing defined benefit clients, the firm is in Japan for a number of reasons, said Eric Buckens, chief executive officer in Tokyo.
"We're setting up a full-fledged asset management" operation in Japan, he said. "And we're aiming at the pension market, both defined benefit and defined contribution."
The firm moved its Japanese equity portfolio manager at the same time it opened the office, he said. It doesn't yet have any new clients, but is "building relationships" with Japanese institutional investors.
From scratch, the office now has 15 people managing money and marketing to prospective clients.
Larger Japanese corporations are preparing for defined contribution plans, he said, but defined benefit plans will remain a part of the pension market. He speculated there could be a combination of the two styles, with companies offering defined contribution plans to new employees.
No one knows what the defined contribution system will look like, although Western money managers have been lining up in recent months to pounce on potential defined contribution assets.
Many Japanese pension plans are severely underfunded, money managers said. They face the challenge of boosting returns to meet future liabilities. (Pensions & Investments, March 8.)
Putnam Investments, Boston, which has sold a variety of products in Japan since 1972 including mutual funds and commingled funds as well as direct investments, paid about 2 billion yen ($16.8 million) for its 10% stake in Nissay Asset Management Corp., a subsidiary of Nippon Life Insurance Co.
"They have very aggressive plans to grow business in the trust side and the pension side," said John Boneparth, managing director, chief of international sales and business development in Boston.
30 pension funds
Putnam is working as a subadviser to Nissay and has had early success. By the end of May, more than 30 Japanese pension funds invested $2 billion with Nissay in Putnam funds, said Steven Spiegel, senior managing director.
And UBS Brinson/Brinson Partners, which is a well-established active money manager in Japan, moved its Japanese equity team to Tokyo from Chicago this winter, said Ben Lenhardt, managing director and head of account management and business development in Chicago.
Among the seven investment professionals were Dale Fritz, a managing director and chief investment officer; and Mark Yim, an executive director.
Before the move, Brinson's U.S. clients had their Japanese equity portfolios or Japanese portions of international or global portfolios run from Chicago. He said the move was to place the staff in proximity to the markets they covered, he said.
The move is part of a greater restructuring that is happening in the Chicago-based Brinson (P&I, May 31).
