Japan a happy hunting ground

Foreign asset management firms have managed to gain a surprisingly firm foothold in the Japanese marketplace, according to a study published this week by Boston-based firm, Cerulli Associates.

The Cerulli report said that foreign asset management firms in Japan had performed far better than expected, and now controlled more than 26 per cent of the addressable assets in Japan, significantly more than the 16 per cent they held in March 2000.

The Cerulli report said that during the past five years, foreign asset managers had benefited from a surfeit of luck and good timing generated by the fact that Japanese investors became more interested in foreign securities, especially global bonds, and domestic markets failed to generate enough returns to fuel legacy players “clobbered by a money-market fund scandal”.

The report said, however, that Japan’s domestic players were trying to strike back and that it was expected that domestic firms would seek to further leverage sub-advising and multi-manager strategies in hopes of securing foreign products that would boost their market share.

Looking at the broader picture in Japan, Cerulli’s report said that some components of the marketplace were continuing to exhibit strong growth with domestic firms “searching feverishly for sub-advisors, particularly those able to build global bond products that can provide suitable streams for Japanese retirees mired in a near zero interest rate environment.”

It said such fast-growing market segments were the silver linings inside a gloomy prognosis for Japan’s fund management marketplace as a whole, which Cerulli predicted to grow at only four per cent a year through to 2008.