Nomura Asset Management Co. diversified its business over a five-year period marked by significant policy change in Japan, leaving the firm better positioned to cope with an uncertain market environment, its CEO said.
"We have a Japanese retail business base, we have exchange-traded funds, we have domestic institutional mandates, we have a reasonably big international business, and each of them is growing," said Kunio Watanabe, the Tokyo-based firm's president and chief executive, in a recent interview.
That diversification — at a moment when it's hard to predict what the coming decade will bring — "is our strength," he added.
Moves by the government and related entities in recent years — from the Bank of Japan's growing purchases of equity ETFs in an effort to boost market liquidity, to the ¥156.8 trillion ($1.4 trillion) Government Pension Investment Fund's shift into risk assets have offered Nomura ETF- and institutional-related opportunities, Mr. Watanabe said.
Meanwhile, with the government gearing up to promote the kind of individual retirement vehicles that buoyed the U.S. market over the past 30 years, there's even reason to hope savers in Japan will follow suit by putting more of their money in stocks and bonds. That outcome could boost Nomura's retail business even as the country's population enters a period of significant declines in coming decades, he said.
Roughly 35% of Nomura's $450 billion in assets under management is managed on behalf of retail investors, with another 26% in ETFs and 39% in institutional accounts. Of that institutional business, 25% is domestic and 14% is international.
As recently as five years ago, Nomura was much more of a retail house. As of March 31, 2013 — a year before Mr. Watanabe took the helm — the firm's business was 56% retail, 9% ETFs and 34% institutional, split 22% domestic and 12% international.
Despite a challenging environment facing a retail market in Japan where the typical account holder is close to 70 years old, Mr. Watanabe said the recent rebalancing of Nomura Asset Management's business reflected relatively strong growth for the firm's ETF and institutional businesses rather than a decline in retail.
Mr. Watanabe said that demographic challenge — with almost ¥55.74 trillion in financial assets being bequeathed to the next generation every year — makes it imperative for Nomura Asset Management to build connections to younger individual savers now.
One possibility: approaching those younger savers directly, as Fidelity does, rather than through distributors, including with fintech solutions where accounts can be opened and decisions on investments made using smart phones. Mr. Watanabe said Nomura executives are studying those options, but he declined to predict when they could be launched.
Changes in government policy over the roughly five years since Shinzo Abe began a second stint as prime minister, pledging to do whatever it takes to revitalize Japan's long-struggling economy, set the stage for the firm's rebalancing.