TOKYO -- Hitachi Corp.'s new investment management subsidiary will manage internally some pension assets for Hitachi and its subsidiaries, said Hiroshi Maruta, deputy general manager of Hitachi Ltd.'s treasury department.
This is believed to be a first for a Japanese company.
Hitachi has 1.85 trillion yen ($16.1 billion) in pension assets; slightly less than half belongs to the subsidiaries.
Some 29 investment managers run the 950 million yen in assets for Hitachi Corp.'s pension plan, he said. They include Japanese insurance companies, investment trusts (similar to U.S. mutual funds) and five foreign managers.
But Hitachi Investment Management at first will manage only Japanese bonds, Mr. Maruta said. He did not say which of the 29 managers would be terminated when Hitachi Investment Management takes over the portfolio.
At the moment, 30% of Hitachi's assets are in Japanese bonds and cash, he said.
Hitachi Investment Management plans to start with 15 investment professionals and expand its staff gradually as the operation grows, he said. Mr. Maruta will be president of the subsidiary. About half the staff will come from the company's finance department and half from outside the company.
The new unit will begin operations once it receives its investment management license, expected later in the year.
In the future, "various assets will be managed internally," he said. He did not say when Hitachi Investment Management would take over different assets or how many outside managers it would use in the future.
By the end of 1999, Mr. Maruta said, Hitachi executives will have set up a manager-of-managers program to run about 20% of its subsidiaries' assets through commingled funds.
"There are over 200 (subsidiary funds) and they are not well managed because of fund size and lack of professional skill," he said. "They mainly hire trust banks and life insurance companies, and only 5%" of the 900 million yen of total assets is allocated to investment advisory or money management companies.
The consolidation of Hitachi's subsidiaries' pension plans will take some time and is also a first for large Japanese corporations, said Masatada Yuzawa, manager, investment management services, for Frank Russell Co., Tacoma, Wash.
Hitachi has 40% of its pension assets in Japanese equities; 25% in non-Japanese equity; and 5% in non-Japanese bonds.
"Japanese pension management is 10 to 20 years behind the U.S.," he said. "So you can easily understand our situation when you remember your country in the 1970s."
A few years ago, Mr. Maruta said, he visited the investment management subsidiaries of General Motors Corp., General Electric Co. and GTE Corp. in the United States.
He said he was impressed with the professional management he found.
Mr. Maruta did not answer questions about Hitachi's liabilities. He did say, however, the company "has been aware of the importance of pension fund problems" and has improved the fund's management by "pouring cash" into the fund and improving fund management.
It has not been able to make the same move for its subsidiaries, he said.
"Although we have been making a great effort for the parent pension fund, out effort is not sufficient for subsidiaries."
