Nikko AM extends marketing reach overseas

Nikko Asset Management is stepping up efforts to market its products and services to global institutional investors, says Tim McCarthy, chairman and CEO. About 10% of the firm's institutional business is sourced outside of Japan. "Now it's time to step on the gas," he says.

The firm already maintains offices in New York (run by president and CEO Masao Matsuda, with Hiroki Tsujimura responsible for Nikko Alternative Asset Management), London (run by CEO Norimichi Mishima and CIO Stuart Kinnersley) and Singapore (under managing director Katsunosuke Ozawa), primarily managing money for Japanese clients, but McCarthy says he is building sales teams in these places as well.

"By the end of this year, up to one-fourth of our total assets will be managed in these international centres," he says. But this is primarily on behalf of Japanese clients.

He believes that global investors will also be interested in dealing with Nikko, which he bills as the first big-sized, independently managed Japanese investment management firm, particularly in niches such as Japanese equity and global macro.

Foreign institutions will first use a global asset manager but will also want to hire a solid, independent local investment firm in order to diversify their exposure to a particular market, McCarthy says, but that no such organization existed in Japan. There is a number of exciting independent boutiques but they lack the scale that many overseas institutions prefer, he argues.

Nikko AM's story is now familiar: after suffering AUM decline for four years, owner Nikko Cordial Group brought in McCarthy, former president of Charles Schwab & Co. in the US, in July, 2004. Since then he has helped mould the firm along the lines of large independent money managers globally, by putting asset management experts on the board of directors, bringing in new investors such as the Government Investment Corporation of Singapore and Warburg Pincus, and awarding portfolio managers with stock options. Former Fidelity Investment Japan president Bill Wilder came on board to serve as CIO, but otherwise it remains a Japanese company.

Since then, the firm has reversed its asset flows, which had reached a nadir of Y54 trillion (including a lot of Enron paper), and now stand at Y74 trillion ($66 billion). McCarthy says fund performance has also improved, in part due to a better incentive structure, and that over 80% of Nikko AM funds are beating their peers. As a result the firm has expanded its retail distribution in Japan from almost exclusively relying on Nikko Cordial's brokers to now selling 40% through banks - although McCarthy notes that, because Nikko AM is no longer seen as captive, it has become a hot sell among Nikko Cordial brokers as well.