The firm has had some early success in offering hedge fund and global fixed income multimanager strategies to institutional investors, particularly financial institutions like insurance companies. But major opportunities exist in the Japanese pension market, opportunities that in some cases might not materialize for another 10 years.
"This is not going to be a short-term success story, but we are developing a number of products right now for this market with an eye on long-term execution," said Mark Hansen, president and chief executive officer of Russell Investments Japan Co. Ltd.
To date, Russell has a total of 800 billion yen (roughly $6.8 billion) in assets under management from Japanese clients — a tiny amount compared to the $167 billion in total multimanager assets run by Russell. Of that total, roughly 30% of the Japanese assets belong to pension plans; the remainder is largely from financial institutions.
Mr. Ueland sees the Japanese institutional marketplace approaching a transition period that could make the use of multimanager strategies more widespread.
"The next step is for us to begin offering local investments to local investors," said Mr. Ueland. "If we can deliver quality Japanese equity and fixed-income multimanager strategies to Japanese institutions, then we can significantly build the business."
Being able to offer local investments strategies will be an important part of wining business with more Japanese pension plans, much like it was when Russell began building its multimanager business in the United Kingdom. "And now our biggest asset class in the U.K. is U.K. equities," said Mr. Ueland.
Japanese pension funds consistently maintain significant exposure to both local equities and fixed income, presenting a major opportunity for investment managers who can add alpha in either asset class. "You need to be able to prove that with a multi-manager strategy, you have built a better mousetrap," said Mr. Ueland.
On average, Japanese pension plans had 51.3% of their assets in domestic equities and bonds (30.9% and 20.4%, respectively) at the end of March, according to data from the Pension Fund Association, Tokyo. In total, the Japanese pension market has more than 50 trillion yen, or more than $424 billion USD, according to the PFA.