Spring 2014

INTERVIEW: A new dawn for Japan

Akiyoshi ObaJapan is a country that has seen many false dawns, but the bold economic policies advocated by prime minister Shinzo Abe have caught the imagination of investors around the world. Akiyoshi Oba of Tokio Marine Asset Management talks to Stefanie Eschenbacher about his vision.

International investors have poured new money into the Japanese equity market, enticed by the bold economic policies of prime minister Shinzo Abe.

Akiyoshi Oba, president and chief executive officer, Tokio Marine Asset Management, says the country’s equity market may finally be turning the corner thanks to these policies. “We believe the outlook is compelling and we have already witnessed some change.”

While Oba acknowledges this has come predominantly from short-term investors, he says even long-term investors started to invest in Japanese equities after the Liberal Democratic Party won the Upper House election in July last year.

Expectations on Abe’s reforms are high in Japan and elsewhere in the world, and any sign that of effects wane may send investors to the exits.

Though Oba stresses the long-term positive changes in Japan, highlighting that the government is committed to improve shareholder rights by introducing the Japanese Stewardship Code.

It contains recommendations for institutional investors that should help increase returns, transparency and corporate governance. “This is a very interesting topic for the market.”

Another interesting topic is the introduction of a new index, the JPX-Nikkei Index 400, which is composed of companies that should have a high appeal for investors.

Those companies meet requirements of global investment standards, including using capital efficiently and being focused on the needs of investors.

Listed on the Tokyo Stock Exchange, the index will promote the Japanese companies in Japan and elsewhere in the world.

Intended to encourage the continued improvement of corporate value, and thereby aiming at revitalising the Japanese stockmarket, Oba says this could be an interesting catalyst for change.

Japanese fixed income has been the dominant asset class at Tokio Marine Asset Management and about 70% of its total assets under management of 6.1 trillion Japanese yen ($60 billion) are from institutional investors.

In the medium and short-term, he says, Japanese equity and Asian equity are flagship assets.

Tokio Marine Asset Management does have a qualified foreign institutional investor licence, which allows foreign investors to invest in A-shares in China.

Oba says the asset manager has not yet applied for a quota. “We are monitoring the demand for China A-shares. Despite the short-term volatility, we still believe in the long-term growth prospects Asia, including China, offers.”

Meanwhile, in Europe, the London office focuses on selling two core strategies, the Japanese Equity Focus Strategy and the Asian ex Japan Equity Focus Strategy.

Those are Ucits funds, domiciled in Dublin, and distributed to international investors.

In the long-term, Oba plans to broaden the offering to international investors.

“We plan to distribute other alternative assets, such as private equity funds, funds of funds, funds of hedge funds and catastrophe bonds to international investors,” Oba says, adding that those funds are currently only provided to Japanese investors.

“We are planning to expand our product offering, as well as our sales coverage where we are less present.”

A relatively new asset class in Europe, catastrophe bonds could be interesting for those seeking an asset class that is not correlated to the global financial market.

Catastrophe bonds are insurance-linked securities that raise money in case of a catastrophe, such as earthquakes, that happen frequently in Japan.

Oba says Tokio Marine Asset Management is taking advantage of the network of the Tokio Marine Insurance group in Asia.

Interview boxHaving launched a global business development team in Tokyo in 2006, the asset manager established a sales and marketing team in London and Singapore in 2008.

“We have been working to build the foundation of the business. Now we are seeing results of these efforts and cash inflows from external and group-affiliated investors into our products.”

Tokio Marine Asset Management manages offers funds investing in Japanese and Asian equities, ranging from traditional, concentrated and engagement funds.

It distributes the asset manager’s own Japanese fixed income products as well as international fixed income products where the investment management function is delegated to a joint venture with its UK-based partner, Rogge Global Partners.

Oba declined to say whether he envisages other strategic partnerships in Europe, the Middle East or elsewhere in Asia.

The main investor base for Japanese government bonds used to be Japanese pension funds and institutional clients. However, he adds that over the past few years the presence of retail clients has increased significantly.

Assets under management from funds of hedge funds and catastrophe bond funds have been increasing, too, albeit from a lower base.

The asset manager prides itself for pioneering the launch of solar energy funds to institutional clients in Japan.

“We have a wide range of alternative products in Japan. We want to develop and bring them to non-Japanese investors along with current products.”

Oba says his team is also closely monitoring the various Asian fund passport schemes that are currently in development.

“We believe these Asian fund passport schemes will have a huge impact in Asia, especially in Japan, since it is the largest market in the region. There are pros and cons for these schemes to be introduced in Japan.”

While the team is monitoring the situation closely, Oba says there are no considerations to redomicile or launch funds to sell them into China.

©2014 funds global asia

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