Japan’s financial regulator Friday ordered AIJ Investment Advisors to stop operations for a month because the Tokyo money manager’s ¥183.2 billion ($2.3 billion) of pension assets under management may be at risk, sparking a nationwide probe of 263 firms.
The Financial Services Agency ordered AIJ to halt business until March 23 “to safeguard investors, as it appears client assets have been adversely affected,” Financial Services Minister Shozaburo Jimi told reporters in Tokyo on Friday. The regulator is investigating “possible losses,” Mr. Jimi said.
The probe is a setback for a pension industry that covers the world’s fastest-aging population and is seeking alternative investments to maintain steady returns because Japanese stocks have been the world’s worst performers in the past two decades. Thirty-two percent of 119 Japanese pension plans wanted to add alternative investments this fiscal year, according to a survey in April 2011 by J.P. Morgan Chase’s Tokyo-based money management unit.
“This has a big impact on the pension industry,” said Mitsushige Akino, who oversees about $600 million at Ichiyoshi Investment Management in Tokyo. “They will be questioning alternative investments, but at the same time the fact that investors are putting money into funds without understanding the risks is a problem, too.”
AIJ may have lost most of the ¥200 billion it manages for corporate pension plans, the Nikkei newspaper said Friday, citing unidentified securities investigators.
Pension funds of companies including Advantest Corp. and Yaskawa Electric Corp. are among those that invested in AIJ’s fund, the Nikkei said. Advantest, a maker of memory-chip testers, said in a statement it has ¥1.7 billion, or about 8% of its total corporate pension fund, invested with AIJ. Yaskawa Electric has about 2% of its pension money managed by AIJ, and the impact will be limited, said Ayumi Hayashida, a spokesman at the company.
Regulators have been investigating AIJ, which invests in futures and options of equities and bonds, since the end of January and discovered that the company has been unable to explain to investors the current state of its fund, according to the financial industry's watchdog.
AIJ, led by Kazuhiko Asakawa, was established in April 1989 and had 120 clients, including pension plans with ¥183.2 billion in assets as of the end of 2010, according to a statement from the regulator. It has 12 employees.
AIJ’s fund, which according to the Nikkei report invested in options, was ranked top among pension funds in 2008, said Fujio Nakatsuka, a spokesman at Rating & Investment Information in Tokyo. Mr. Nakatsuka said the rankings were based on responses from pensions and not what R&I had recommended to investors.
A phone call to AIJ’s main office Friday was answered by an automated recording that didn’t take messages.