BlackRock-Mizuho alliance takes shape

BlackRock and Mizuho Financial Group have signed a business alliance that, while not exclusive, is intended to introduce cooperation across all business lines and client segments.

Hiroyuki Arita, managing director at BlackRock in Tokyo, says the parties have not yet decided specific terms of collaboration. But because BlackRock signed the deal with Mizuho Financial Group, it is intended to include all aspects of the Japanese financial giant, including trust banking, commercial banking, securities, and corporate banking.

Mizuho Financial has set up an internal planning group to further drive its asset-management ambitions, including possible opportunities in the rest of Asia.

The group already has two existing, autonomous asset-management affiliates. These include Mizuho Asset Management, formed in 2007 with the merger of Dai-Ichi Kangyo Asset Management and Fuji Investment Management (a legacy of a previous round of bank consolidation); and Diam, which dates back to a 1999 three-way merger of Dai-Ichi Life Asset Management and two arms of Industrial Bank of Japan.

Because the BlackRock deal was made with the parent group, these asset-management businesses could in theory be part of a collaboration, but so far there has not been contact between them and BlackRock.

Arita, who once worked at IBJ, says he knows many people at Mizuho as a result of his experience, but that is not what drove the deal. He says it is based on both Mizuho’s size and weight in the local market, and existing relationships touching across multiple divisions of both organisations.

“This alliance for BlackRock is about local expertise, but for Mizuho it is about global reach,” Arita explains. Despite BlackRock’s huge size in Japan (it sources $250 billion from Japanese clients in US dollar terms, as of 2010, according to AsianInvestor magazine), it is still considered a foreign firm, and it lacks the local scale of the likes of Mizuho Trust & Banking ($613 billion), MUFJ Trust & Banking ($328 billion), or Sumitomo Trust & Banking ($766 billion).

Meanwhile Japanese financial groups know their local market is big but is not growing, and that expansion can only come from overseas. In addition, there is an obvious need to invest more Japanese assets into high-return Asian markets and other global asset classes.

Arita says the business alliance is not exclusive, although BlackRock does not have anything like it in Japan. “Our aspiration is to help each other with products and with client introductions. We do not yet have specific goals, but without this business alliance, we would not be able to maintain a top-to-bottom business relationship.”

He adds the scope of discussion can include retail and institutional investors.

That collaboration will be jointly driven by a steering committee set up by BlackRock to drive the relationship with Mizuho, which consists of eight or nine people, including Arita; and by Mizuho Financial’s asset-management planning committee.