Japanese defined-benefit pension assets under discretionary management at the country’s local and foreign fund firms stood at 118,611 billion yen [then US$1,055.26bn) at the year end on 31 March, 2.4% up on 12 months previously, while the number of mandates under which the business is done was down by 1.3% to 4,710.
The figures come from an analysis of data which members of the Japan Investment Advisers Association submit to it and so exclude sums which pension funds manage inhouse or are handled by non-JIAA members (for these and other exclusions see at the foot of the first table).
Firms with public-sector customers – which pay wafer-thin fees but include the Government Pension Investment Fund, the world’s largest institutional investor – continue to have the largest market shares though there is a more equitable spread among those serving corporate retirement schemes.
The loss of a GPIF mandate can cause a firm to fall dramatically in pensions manager rankings. Thus the 2015/16 year saw Northern Trust tumbling from 11th to 57th when it could no longer include a 2,000 billion yen passively managed international bonds mandate from the Fund.
When a foreign firm slips in this way it is hard to know whether the drop is an accident of timing, with renewal of a mandate simply spanning the year-end cut-off, whether it has decided to devote resources to different businesses or different parts of the world, or some other cause. The year also saw Northern Trust’s count of private sector mandates continuing its fall to hit four compared with 10 three years ago to five last time.
By contrast BNY Mellon saw its business grow by 128.7% and a consequent move up the overall rankings from 36th to 20th even though it had three fewer mandates overall than last year but four more public-sector funds of which it now holds six.
Similarly Prudential Investment Management rose from 35th to 23rd by winning five new public sector mandates bringing its total to seven but still has only one corporate customer.
Beyond these three firms there was very little change on the top 25 except that BlackRock Japan and Mizuho Trust & Banking swapped places and further down a trio of newcomers made their debut: Macquarie Asset Management Japan at 99, Towers Watson Investment Services at 104 and Fivestar Asset Management at 109.
The overall ranking, like the leaders, is close to evenly split between local and foreign-headquartered firms.
In addition to GPIF the public-sector includes the massive local and national civil service pension schemes plus the Pension Fund Association which manages the assets, which would otherwise be orphaned, of company employees who have left jobs.
The total public pensions pot consisted of a hefty 481 mandates covering 93,830.4bn yen of assets at 31 March, compared with 260 and assets of 87,797.61bn last time. At the same time the private sector had 4,226 mandates covering 24,780.5bn yen, against 4,497 and 28,064.2bn yen last time.
The fall in corporate pensions values and mandates, the third in three years, is concerning but these assets are not necessarily lost to the market. Rather, the drop may simply mark a move into public sector hands of the assets of a supplementary government scheme, known as the daiko, which was once managed by companies but responsibility for which some are still in the process of handing over to GPIF.
The market share of the top ten firms on the government-related side of the market is over 83% while the top 10 on the company side have just over 50%.
The most noticeable trend to emerge in analysing this year’s figures has been what is not there. For the first time in 20 years the absence of asset manager mergers in the previous 12 months meant there was no need to combine the historical numbers for two or more firms so that they are comparable with those of the new single entity.
In the 1990s this trend was most marked among foreign firms as when, for example, the Brinson component of the Yasuda Kasai Brinson joint venture was acquired by Swiss Bank Corp and made part of a new new j.v. with what was then LTCB.
That was in 1997, the year in which the failure of Chuo Trust & Banking and Nissan Life began the slides which brought Japan’s banking and insurance sectors to the brink of collapse.
Government bail-outs followed and both industries began two decades of repeated consolidations of their asset management and other operations which proved so preoccupying that foreign firms bagged most of the business resulting from a radical pensions deregulation 1995.
Local firms have since found the skill sets and stability needed but there is little to indicate whether the new equilibrium will hold or is simply a stopping off point on the route to outcomes as yet unknown.
Japan is home to the world’s second largest pool of defined-benefit assets – behind the much larger US and ahead of the UK.
For further information on analyses of the data on which this post is based please use the ‘contact’ tab above. The data cover 130+ fund management firms over several years and include rankings by growth rates and average mandate size among other points.
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