R&I annual awards to institutional investment firms announced

It’s a sunny day in Tokyo and especially so for Mitsubishi UFJ Trust & Banking, Sumitomo Mitsui Asset Management and Wellington Management Japan, each of which has just scored three places in Rating & Investment’s annual awards to managers used by the country’s defined-benefit pension schemes. The awards cover nine investment categories.

The climate is also pretty good for Ashmore Japan, Goldman Sachs Asset Management (surely the first time these two firms have been included on single score sheet) and at T. Rowe Price, each of which take two places.

Sunbeams come singly for a further 14 firms whose products have wins in a wide range of strategies.

The three winners in each category were selected on the basis of their information ratios over the three years ending 31 March 2015, 2016 and 2017, as monitored via R&I’s universe.

R&I is the actuarial consulting subsidiary of the Nikkei Inc newspaper Group and a sister company of the Quick Asset Management Research Centre, both of which support the awards that are now in their eleventh year.

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

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Heavy lifting on re-allocation looms for public service pensions

The Federation of National Public Service Personnel Mutual Aid Associations, known as KKR, seems to have  put a flurry of activities in hand ahead announcing its  results for the year to 31 March.

The pension fund has committed to bringing its asset allocation into line with that of the Government Pension Investment Fund and has some mighty shifts to make in meeting that aim as the pie charts above show —  the first for KKR  and the second for GPIF, both at 31 December 2016.

To help manage the re-allocation KKR has already hired BlackRock Japan, Mitsubishi UFJ Trust & Banking, Japan Master Trust and Russell Investments as transition managers.

The retirement scheme for civil servants who work for  national government looks as though it will need some help cutting its government bond holdings — the bulk of which made by way of ‘duty investment’ in Fiscal Investment and Loan Program (FILP) and other debt imposed on it in a very different era. As this imposition was by way of guidance rather than legislation the necessary policy reversals should be relatively easy.

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

 

 

 

 

 

 

 

 

 

 

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FSA commissioner Mori boxes investment trusts’ ears

“Japanese investment trusts, or toushin, saw the first outflow of funds in six months in April, industry data showed on Tuesday, following scathing criticism of the industry from the head of the country’s financial watchdog” Reuters reports.

Much depends here on the definition of ‘outflow’, since in market value terms the field is not shrinking.

However the report’s significance is in its account of a speech given early in April by Financial Services Agency (FSA) commissioner Nobuchika Mori (pictured alongside) in which he “blasted the Japanese asset management industry for not catering to the true benefit of its customers”.

Numbers from the Investment Trusts Association show that at the end of April the outstanding value of publicly offered stock and bond trusts, bought manly by retail investors, was 98,835.3 billion yen, compared with 98,774.3bn yen a month earlier.

Privately placed stock and bond trusts, held mainly in institutions, showed a similar rise – from 76,826.0bn yen at the end of March to 77,949.1bn yen at 30 April.

In term of stock trusts alone, those offered to the public rose in value from 85,938.3bn yen at the end of March to 86,159.1bn yen a month later while those placed privately saw their value climb from 72,640.9bn yen to 73,742.2bn yen.

Mr Mori focused his remarks, according to Reuters, on what individuals get from their toushin investments, noting that the average return from about 280 active Japanese stock funds over the last 10 years, after deducting fees, has been 1.4%, with a third of them making losses, compared to average annual gains of 3% in the Nikkei stock index.

“How long are you going to keep this practice?”, the commissioner asked before questioning whether customers who do not get a decent return on financial products go on to build such investments.

“After the FSA’s comments, staff are in the dark on what they should sell, or recommend to their customers,” an executive at a European asset management firm told Reuters. As a result sales has almost stopped

Again definitions are important and it is not known if the “practice” to which Mr Mori referred embraced not only poor investment performance but also the way  investment trusts are peddled, often on the telephone, as though they were stocks with, for example, indications of target price ranges and frequent churning recommendations to generate fees.

The industry has long said it will abandon such tactics.

Rijicho: Mr Masami Mizuno

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

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Postal institutions keep portfolio composition fairly steady

Investment assets at the mighty Japan Post Bank rose 1.13% in the year to 31 March 2017 to reach 287,193.4 billion yen while those of sister institution Japan Post Insurance fell by 1.37% to 80.336.7bn yen, according to the pair’s just-published results.

The most significant change in asset composition for both was a shift away from Japan Government Bonds and into foreign securities – a category which is not further disaggregated.

Neither institution reveals the maturity of its JGB holdings which is a pity since it is key to understanding how the shape of their portfolios might change in future and to assessing the possible impact of that on the markets in which they invest.

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In the year just closed Post Bank’s JGB holdings fell from 40.1% of its portfolio at 82,255.6bn yen, to 33.2% at 68,804.9bn yen. At Post Insurance the drop was much less steep, from 54.2% of the total at 44,178.6bn yen to 53.2% at 42,732.3bn yen.

The disposition of Post Bank’s portfolio looks somewhat different when the item ‘due from banks, short-term investments, etc’ is deducted from the total. The level of assets ‘due from banks’ is arguably driven by the underlying business rather than investment decisions. When it is removed JGBs go from 33.2% to 46.91% of the total and foreign securities from 25.5% to 36.08%.

Text continues below table. Sorry about the blurred outlines. The problem is with the original.

Almost half the 13,450.7bn yen fall in the Post Bank’s JGB investments went into foreign securities, which rose in value to 52,917bn yen, while a similar proportion made the same transition at Post Insurance.

It is unlikely that either institution actually sold JGBs during the year but rather took cash when existing paper matured and reinvested it elsewhere. This has been the established pattern since the Bank of Japan embarked on its aggressive monetary loosening policy and the postal companies made their debuts on the stock exchange.

Only the smallest amounts from this exercise have been directed at local equities which remain the poor relation for all the hyped talk of the portfolios taking new directions.

Doing anything adventurous with depositors’ savings or policy holders’ may meet resistance in the short run as Japan Post Holdings — which owns large slices of Post Bank and Post Insurance as well as the mail and delivery operations — has recently suffered a loss of shareholders’ cash and its own face after its acquisition Australia’s Toll Holdings went soar, creating a 400.3bn yen asset impairment charge in the new accounts.

The holding company, which hopes to go public later this year, is nonetheless reliably said to be in talks to acquire a majority stake in Nomura Real Estate Holdings. 

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

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Post Bank & Post Insurance results for year to 31 March 2017

The results for the financial year ending 31 March 2017 for Japan Post Bank and Japan Post insurance are here and here. Analysis of the it their asset portfolios will appear on this blog soon.

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Stark picture in new population projections to 2065

Excellent commentary by Jun Saito of the Japan Centre for Economic Research  on the economic implications of the The National Institute of Population and Social Security Research’s latest demographic projections. The forecasts cover the period to 2065 when the country will have just 88.077 million people compared with 127.095 million in 2015, a decline of 30.7 percent. By 2115 it could well be few still but the proportion accounted for by the elderly should then have stabilized at around 38%.

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

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Privately placed investment trusts saw record year in 2016-17

Assets under management in privately placed investment stock and bond trusts rose by 20.78% in the year ending 31 March 2017 to reach a record 76,826.0 billion yen, figures just published by the Investment Trust Association and analysed by the Japan Pensions Industry Database show.                                                                Text continues below table                                                                                                                                                                             The climb is far greater than the 6.87% (see posting below) enjoyed by publicly quoted trusts.                                                                                                            

Thirty-one of 82 companies in the field beat the growth figure for the sector as a whole, including top-ranked Sumitomo Mitsui Trust Asset Management which expanded by 28.44%,  knocking into second place what is now Asset Management One — a merger between DIAM (a 50:50 joint-venture between Mizuho Financial Group and Dai-ichi Life), Shinko Asset Management, Mizuho Asset Management and the asset management division of Mizuho Trust & Banking.

At over 1,000% the greatest gains were once more at GCI Asset Management, a relative minnow, which also led the growth table for publicly quoted funds. Founded in 2000, the firm uses ‘innovative hedge fund strategies’ and is headed by Hideki Yamauchi and manages 26.1bn yen

At the other end of the scale BlackRock is not quite the whale it once was in privately placed trusts, falling from 2nd place by AUM to 6th. Foreign firms make up most of the names in the ranking by declines.

Stock investments account for 72,640.9n yen of the total and bonds for just 4,185.1bn yen.

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-

 

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In investment trusts Nomura still top by size but GCI by growth

The investment trust business regained some poise in the year ended 31 March 2017 with assets under management in publicly offered stock and bond mutual funds rising by 6.87% to 98,774.3 billion yen following a 12-month term in which they fell by 0.79% (see archive 2016-5-10), figures just published by the Investment Trust Association and analysed by the Japan Pensions Industry Database show.

Nomura still rules the roost and grew by a very respectable 10.60% during the year. Second-ranked Daiwa did not do quite so well but still expanded by 8.11% while Nikko put on 17.68% to regain its position at number three.                        Text continues below table

Of the 81 firms in the sector 36 expanded by more than the average with some of the small players, as in any vibrant market, showing spectacular climbs though from very low bases.

A merger of already related interests again played a role but made for little change in the league tables.

Last time the combining of Mitsubishi UFJ and Kokusai pushed Nikko Asset Management down to fourth from third but it is now back at number three. That is two notches above Asset Management One, newly assembled from DIAM, a 50:50 joint-venture between Mizuho Financial Group and Dai-ichi Life, Shinko Asset Management, Mizuho Asset Management and the asset management division of Mizuho Trust & Banking. One’s growth of mere a 2.51% — putting it just three places above the position formerly occupied by DIAM — suggests that its management may have been distracted by work on integration.Among the big top 20 players Legg Mason Asset Management (Japan) produced a sparkling near-doubling of assets under management to rank 16th (up from 21st last time) and 8th in terms of growth rate. BlackRock did well too with AUM up by 42.14% to put it in 17th place (compared with 18th a year ago) and 12th in growth and Tokio Marine Asset Management grew by over 25% to finish 14th overall (up one place from last time) and 16th in terms of expansion.

While the biggest gainers were relatively small firms from the 5th, 6th and 7th percentile so too were the losers which include such well known international names as BNP Paribas Investment Partners Japan and Alliance Bernstein plus such domestic names as Sompo Japan Nipponkoa Asset Management and Meiji Yasuda Asset Management, both members of insurance groups.

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

 

 

 

 

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Fitch gives Japan’s insurance companies best possible ratings

Fitch Ratings has set the long-term, issue default ratings’ (IDR) ‘outlook’ of all ten Japanese insurance companies at ‘stable’. The move follows ratings reviews and upgrades of the individual firms’ debt lines  (see below).

For eight of the firms — Daido Life,  Fukoku Mutual Life, Meiji Yasuda Life, Mitsui Sumitomo Insurance, Nippon Life, Sompo Japan Nipponkoa, Sumitomo Life and Taiyo Life — the stable label is the highest they can achieve since it is equivalent to Fitch’s view on Japan’s long-term, local currency, sovereign debt which makes up a large part of their balance sheets.

For Dai-ichi Life and Tokio Marine & Nichido Fire, Fitch is of the view that ‘their business diversification counterbalances their heavy Japanese government debt holdings [and this allows their ratings] to be up to one notch higher than’ those of the others but does not say what that rating is.

It notes too that the parent of Mitui Sumitomo Insurance, MS&AD Insurance Group Holdings, has been expanding overseas  by acquiring foreign insurers and is approaching the threshold where it could be considered internationally diversified.

Fitch’s ratings for the firms are now:

Dai-ichi Life Insurance Insurer Financial Strength (IFS) rating affirmed at ‘A+’; Outlook revised to Stable from Negative, Long-Term IDR affirmed at ‘A’; Outlook Stable; US$1.3 billion cumulative perpetual subordinated notes issued in 2011 affirmed at ‘A-‘; US$1 billion cumulative perpetual subordinated notes issued in 2014 affirmed at ‘A-‘; US$2.5 billion cumulative perpetual subordinated notes issued in 2016 affirmed at ‘A-‘.

Daido Life Insurance IFS rating affirmed at ‘A’; Outlook revised to Stable from Negative.

Fukoku Mutual Life Insurance IFS rating affirmed at ‘A’; Outlook revised to Stable from Negative, Long-Term IDR affirmed at ‘A-‘, Outlook Stable;                                          US$0.5 billion cumulative perpetual subordinated notes issued in 2013 affirmed at ‘BBB+’,                                                                                                                                             US$0.5 billion cumulative perpetual subordinated notes issued in 2015 affirmed at ‘BBB+’.

Meiji Yasuda Life Insurance IFS rating affirmed at ‘A’; Outlook revised to Stable from Negative Long-Term IDR affirmed at ‘A’; Outlook revised to Stable from Negative;       US$2 billion subordinated notes due 2045 affirmed at ‘A-‘.

Mitsui Sumitomo Insurance IFS rating affirmed at ‘A’; Outlook revised to Stable from Negative –Long-Term IDR affirmed at ‘A’; Outlook revised to Stable from Negative;       US$1.3 billion subordinated notes due 2072 affirmed at ‘A-‘.

Nippon Life Insurance IFS rating affirmed at ‘A’; Outlook revised to Stable from Negative Long-Term IDR affirmed at ‘A’; Outlook revised to Stable from Negative;              US$2 billion subordinated notes due 2042 affirmed at ‘A-‘,                                              US$2.25 billion subordinated notes due 2044 affirmed at ‘A-‘,                                              US$1.5 billion subordinated notes due 2046 affirmed at ‘A-‘.

Sompo Japan Nipponkoa Insurance IFS rating affirmed at ‘A’; Outlook revised to Stable from Negative –Long-Term IDR affirmed at ‘A’; Outlook revised to Stable from Negative;                                                                                                                                          US$1.4 billion subordinated notes due 2073 affirmed at ‘A-‘.

Sumitomo Life Insurance IFS rating affirmed at ‘A’; Outlook revised to Stable from Negative, Long-Term IDR affirmed at ‘A’; Outlook revised to Stable from Negative;         US$1 billion subordinated notes due 2073 affirmed at ‘A-‘

Taiyo Life Insurance IFS rating affirmed at ‘A’; Outlook revised to Stable from Negative

Tokio Marine & Nichido Fire Insurance IFS rating affirmed at ‘A+’; Outlook revised to Stable from Negative

 

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Nomura Asset Management shows up for shareholder value

Nomura Asset Management has become the first major Japanese asset manager  to unveil how it voted on proposals put to shareholders’ meetings of companies in which it is invested.

The statement is available in Japanese only and neither it nor the English-language Nikkei report on the disclosure notes when the company was voting in its capacity as the steward of mutual funds and when as the manager of institutional money. It therefore does not show whether the institutions whose assets it invests were asked about their wishes on the various resolutions.

It does, however, in closing that:

‘With more attention being paid to strengthening corporate governance, the Financial Services Agency has updated Japan’s stewardship code for institutional investors, urging them to disclose their votes on resolutions at listed companies beginning in June. Voting history may become an important factor for pension funds and other investors choosing asset managers.’

So perhaps the distinction will be made clear in future disclosures.

NAM’s voting guidelines are centrally concerned with shareholder value and it  opposed 8.6% of the 2,635 resolutions put to general shareholder meetings in the quarter ended March.

Some of these dissents, according to the Nikkei seem ‘to run counter to the interests of other Nomura group members’. NAM voted against the merger that formed plastics maker C.I. Takiron, saying it was disadvantageous to minority shareholders, even as Nomura Securities advised the C.I. Kasei side of the deal.  The firm also opposed some nominees for board seats at Suntory Beverage & Food, for which Nomura Securities is lead managing underwriter.

NAM also against anti-takeover measures by brewer Sapporo Holdings and sportswear company Asics, as well as proposals at DMG Mori and others to transfer stock to foundations connected to their founding families, saying these moves would hurt returns for small shareholders.

© 2017 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes big commitments of money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com and a link provided to the original text on that site.

This blog would not exist without the help and humour of Diane Stormont, 1959-2012

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