Japan’s Noritz pension fund eyes managers for India entry
The Japanese Noritz Corporate Pension Fund (Noritz) is eyeing an entry into India equities, but is so far lacking the right kind of product from asset managers to cater to Japanese corporate pension funds’ long-term investment plans.
The world’s most populous country’s booming economy is drawing increasing attention and capital from asset owners, and rightfully so according to Kiyoshi Iwashina, chief executive officer and chief investment officer at Noritz.
“I am watching the India market, but it is still growing, so compared to the US and Western European markets it is still in a weaker situation in areas like investor-related regulations. But our next target market could be India,” Iwashina told AsianInvestor.
The relatively lower transparency in the developing economy and concerns about regulations make it crucial for Noritz to enter in the right manner. And so far, its CIO has not been persuaded that the right solution exists.
“The investment industry currently does not provide the right kind of India-focused funds that provide good opportunities for Japanese investors to invest in. So, I am waiting for such products, and hopefully they will come in the near future,” Iwashina said.
He manages the defined benefits pension scheme with an annual return target of 3% for domestic employees at Noritz, a Japanese corporation primarily known for producing tankless water heaters for industrial and private home use.
In the fiscal year ending March 31, the pension fund made a return of 9.7%. At the same time, Noritz Corporate Pension Fund had assets under management (AUM) worth ¥25.1 billion ($172.7 million).
ACTIVE PREFERENCE
Iwashina elaborated that it will most likely be within India’s equities market that Noritz would enter the country. And while he sees merits for both passive and active strategies in equities, which is better would depend on the timing of the market, in his view.
“I currently prefer to invest in actively managed investment vehicles, because based on my outlook for the equity market, there could soon be a great price correction. At that time, stock picking [would be] a very important factor to achieve great performance results,” Iwashina said.
Also read: Noritz Pension plans pivot to active managers on downturn expectations
In its fiscal year ending March 31, Noritz had 28.6% and 17.5% of the total AUM invested in foreign fixed income and equities, respectively, while domestic fixed income and equities only made up 5.9% and 1.8%.
Hedge funds and multi-asset investments accounted for 14.6% and 7.3%, respectively, while the rest was in cash or short-term assets (20.2%) and the general account (4.2%).
IPO GALORE
India’s surging stock market has been in the spotlight due to a booming initial public offering (IPO) market, one of the best-performing globally in the first half of 2024, buoyed by surging valuations and promising economic fundamentals.
“We expect more companies to tap the equity capital markets for IPOs and follow-on offerings, benefiting from the buoyant market conditions and strong underlying fundamentals in the medium to long term,” Mahesh Natarajan, head of equity capital markets for India at Nomura, told AsianInvestor earlier in August.
Also read: Will India’s IPO market scale new highs in H2?
Between January and July, more than 150 companies raised nearly $5 billion through IPOs in India, almost double the amount raised in the same period last year, according to LSEG data.
The biggest IPOs span various sectors, including technology, financial services, infrastructure, and biotechnology. A notable example is SoftBank-backed electric scooter maker Ola Electric's $734-million debut in early August.
In the coming months, at least 15 companies are preparing to make their public market debut, potentially raising a combined $11 billion, Bloomberg-compiled data showed.
Also read: Appeal of India's private markets rising among asset owners
Currently, India boasts approximately 1,600 companies with market caps exceeding $100 million, growing annually by mid-single digits, offering ample opportunities for active fund management and outperformance, according to Deepika Mundra, Indian equity research director at M&G Investments.
“For foreign institutional investors, the Indian IPO market presents multiple opportunities, especially given their light positioning in India. Equities offer increased possibilities for portfolio diversification and potentially high returns, though due diligence is crucial with the influx of new market entrants,” Mundra told AsianInvestor earlier in August.