The Cerulli Report Asset Management in Japan 2015 Capturing Rising Foreign Interest NEW Interactive Data Supplement Overview & Methodology This joint report between Cerulli Associates and Nomura Research Institute (NRI), in its third iteration, provides an update on the Japanese investor landscape across key client segments retail pension funds, banks, and insurers. In light of the recent public pension reforms and evolving distribution trends, this report assesses opportunities for foreign managers with insights from key decision makers. It highlights subadvisory opportunities, both retail and institutional, for asset managers and puts forth the most optimal strategy for firms wishing to tap into these addressable assets. Data included in this report is from an annual survey of nearly 70 asset managers, representing 80% of the assets under management in Japan. LOOK INSIDE THIS REPORT Benefits - Analyze the market size and identify opportunities - Assess Japanese managers criteria for selecting foreign managers - Examine the outlook for household financial assets - Understand which asset flows are more stable in Japan - Evaluate changes the GPUF has made to its foreign bond manager structure Questions Answered - Besides the much-talked-about Nippon Individual Savings Accounts (NISA), what are the other drivers for households to move from deposits to investment products? - What is the impact on asset managers from public pension reforms and to what extent can the change be expected in other pension sectors? - Who are the top-10 foreign subadvisory managers in Japan? - What are the selection criteria and servicing requirements for subadvisory mandates? - How can managers leverage banks increased allocation to foreign securities? NEW Interactive Data Supplement Experience Cerulli s digital platform and interact with analyses from this report today 197 Pages, 133 Exhibits Subscription Information $17,000 Annual - Hardcopy - Digital copy in color - Unlimited online firm-wide access - Exhibits in Excel - Key findings - Online access to 6 related reports - Analyst support - NEW Interactive Data Supplement Research Included A subscription to this report remains active until the next iteration of this report releases and includes online access to the following related Cerulli research: Six years of Asset Management in Japan To Purchase CALL +1 617-437-0084 EMAIL info@cerulli.com VISIT www.cerulli.com With this report subscription, we re pleased to include these interactive dashboards: 1. Japanese Mutual Fund Market Overview: Examine the assets under management and net new flows by open-end equity investment trust and conventional investment trust. 2. Japanese Pension Funds Market Overview: Review assets under management and asset allocation by pension fund. 3. Japanese Financial Institutions Overview: Assess the Japanese financial institution landscape by asset class and bank type.
New Cerulli interactive Data SupplemeNt Interact with select Cerulli Report analyses today What are Interactive Data Supplements? We are pleased to offer an interactive experience with select data contained in 2015 Cerulli Reports. This Interactive Data Supplement (IDS), allows you to interact with select exhibits in unique ways: NEW Interactive Data Supplement Access consolidated data from multiple report exhibits in a single comparative view Home in on specific data elements Build custom charts that are easily exported for presentations and other materials Apply customizable filters to Cerulli Report analyses including assets under management, net new flows, product type, channel, year, marketplace, and currency $120,000M $100,000M $80,000M EXPLORE FIRM: Select Firm YEAR: 2010-2Q 2013 PROGRAM TYPE: Customize elements including currency, year, channel, etc. $60,000M $40,000M $20,000M $0M 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 $140,000M $120,000M $100,000M $80,000M $60,000M $40,000M $20,000M 10% 5% 0% -5% (All) Mutual Fund Advisory Separate Accounts Rep as Portfolio Manager PROGRAM NAME: (All) Manager Select Model Wealth Portfolio Optimum Market Portfolio Personal Wealth Portfolio SAM (non-securities) SAM (securities) UVEST - CAA UVEST - NATCO UVEST - Vista Mgr Direct UVEST - Vista Wrap Rep as Portfolio Manager Separate Accounts Mutual Fund Advisory Assets Growth Rate View granular data Export exhibits the way you want them to look in Excel, PDF, or as an image $0M 2010 1Q 2011 2Q 2011 3Q 2011 4Q 2011 1Q 2012 2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 Source: Cerulli Associates Remember my changes How to Access IDS This new service is complimentary and is accessible via Cerulli Client Login. Simply access your firm s online Cerulli research with your unique login credentials and you will find the View Interactive Data Supplement link to this platform in My Reports. VIEW INTERACTIVE CHART You can also jump to the related IDS chart in the report by clicking on the View Interactive Chart button throughout the PDF. To obtain online access: Visit www.cerulli.com, or contact our account management team: +1 617-437-0084 info@cerulli.com
Mutual Funds Chapter 6 exhibit 6.19a Discretionary Managed Account Assets Under Management, 1H 2005 1H 2015 ( trillions) Source: Nomura Research Institute, based on Fundmark data 5 4.4 4 3.4 3 2 1 0 1.8 1.1 0.8 0.6 0.2 0.3 0.3 0.01 0.03 0.1 0.1 0.2 0.3 0.3 0.3 0.4 0.4 0.4 0.4 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 AUM in investment trusts exclusively for DMAs (e.g., fund wraps, SMAs) have grown rapidly since the second half of FY2012, reaching 4.4 trillion by end-september. the Cerulli Report Asset Management in Japan 2015 115 C A
Expanded table of Contents table of CoNteNtS - Expanded Key Questions Answered...14 1. Will investment trusts see major inflows from households?...14 2. Which asset flows are more stable in Japan, retail or institutional?...15 3. What changes has the GPIF made to its foreign bond manager structure?...16 4. What should a new entrant consider when it looks for business opportunities in Japan?...17 Chapter 1: the Japanese Investor landscape...19 Exhibit 1.01. Asset Management Business in Japan, March 2015...20 Exhibit 1.02. Assets Under Management by Asset Management Companies in Japan, March 2003 March 2015...21 Exhibit 1.03. Outlook for Household Financial Assets (5-Year Forecast)...22 Exhibit 1.04. Breakdown of Household Financial Assets by Investment Experience and Purpose of Funds...24 Exhibit 1.05. Loan/Deposit Rate and Security/Deposit Ratios by Bank Type, March 2003 July 2015...26 Exhibit 1.06. Impact of Bank of Japan in Japanese Government Bond Market Through 2015...27 Chapter 2: Asset Management Companies in Japan...30 Exhibit 2.01. Japanese Asset Management Industry Assets Under Management by Investor Type, March 2015...31 Exhibit 2.02. Decomposition of Annual Changes in Asset Management Company Assets Under Management, FY2003 FY2014...33 Exhibit 2.03. Largest Public Mutual Fund and Pension Asset Managers, March 2015...35 Exhibit 2.04a. Asset Management Company Aggregate Revenues, FY2003 FY2014...37 Exhibit 2.04b. Domestic Asset Management Company Profit Margins, FY2006 FY2014...37 Exhibit 2.05. Asset Management Company Cost Structures, FY2014...38 Exhibit 2.06. Use of Business Process Outsourcing in Japan...40 Chapter 3: the Subadvisory Attraction...41 Exhibit 3.01. Japanese Investment Trust Asset Under Management Outsourced to External Managers, 2000 September 2015...42 Exhibit 3.02. Outsourced Share of Investment Trust Assets Under Management by Fund Category, September 2015...43 Exhibit 3.03. Basic Subadvisory Arrangements...44 Exhibit 3.04. Roles of Fund Sponsors and Subadvisors...45 Exhibit 3.05. Breakdown of Investment Trust Assets Under Management Between Japanese and Foreign Asset Management Companies, June 2013...46 Exhibit 3.06. Subadvisors Ranked by Subadvised Assets Under Management, June 2015...48 Exhibit 3.07. Investment Trust Companies Ranked by Assets Under Management Outsourced to Subadvisors, June 2013...50 Exhibit 3.08. Process of Building Relationship with Subadvisor for an Investment Trust Distributed Through the Broker/Dealer Channel...51 Exhibit 3.09. Japanese Asset Managers Subadvisor Search Process for an Investment Trust Distributed Through the Bank Channel...52 the Cerulli Report Asset Management in Japan 2015 7 C A
table of Contents Expanded Exhibit 3.10. Advisory Product Development/Launch Flow...53 Exhibit 3.11. Asset Classes Rated by Asset Management Companies in Terms of Interest in New Advisory Products, 2015...55 Exhibit 3.12. Key Subadvisor Selection Criteria, 2015...56 Exhibit 3.13. Types of Subadvisor Relationship...58 Chapter 4: Public Pension Funds...59 Exhibit 4.01. Roadmap of GPIF and Related Parties Actions...60 Exhibit 4.02. Adoption of New Policy Asset Mix by GPIF...61 Exhibit 4.03. Replacement of Japanese Equity Managers in March 2015...63 Exhibit 4.04. GPIF s Manager Structure in Foreign F/I Portfolio...67 Exhibit 4.05. GPIF s Desired Governance Structure...69 Exhibit 4.06. Outlook for Pension Fund Business in Five Years, 2015...71 Chapter 5: Foreign Managers...74 Exhibit 5.01. Assets Under Management and Revenues by Major Client Segment, August 2015...75 Exhibit 5.02. Revenue Pools and Marketing Approaches by Major Client Segment, August 2015...76 Exhibit 5.03. Investment Process Characteristics from the Standpoint of Sales Model and Branding...77 Exhibit 5.04. Largest Foreign Asset Management Companies by Assets Under Management in Japan...82 Chapter 6: Mutual Funds...83 Exhibit 6.01. Overview of Investment Trusts in Japan, September 2015...86 Exhibit 6.02a. Open-End Equity Investment Trust Assets Under Management, 1997 September 2015...87 Exhibit 6.02b. Open-End Equity Investment Trust Net Flows, 1997 September 2015...88 Exhibit 6.03. Open-End Equity Investment Trust Assets Under Management by Asset Management Companies, September 2015...89 Exhibit 6.04. Open-End Equity Investment Trust Assets Under Management by Net Flows, September 2015...90 Exhibit 6.05a. Breakdown of Open-End Equity Investment Trust Assets Under Management by Mode of Intermediation, September 2006 September 2015...91 Exhibit 6.05b. Breakdown of Open-End Equity Investment Trust Assets Under Management by Mode of Intermediation, September 2015...92 Exhibit 6.06a. Conventional Investment Trust Assets Under Management, 1997 September 2015...93 Exhibit 6.06b. Conventional Investment Trust Net Flows, 1997-September 2015...94 Exhibit 6.07a. Breakdown of Conventional Investment Trust Assets Under Management by Fund Category, 1997 September 2015...95 Exhibit 6.07b. Percentage Breakdown of Conventional Investment Trust Assets Under Management by Fund Category, 1997 September 2015...96 Exhibit 6.08. Conventional Investment Trust Assets Under Management and Net Flows by Asset Management Companies, September 2015...97 Exhibit 6.09a. Monthly Dividend Fund Assets Under Management, 1997 September 2015...98 Exhibit 6.09b. Monthly Dividend Fund Net Flows, 1997 September 2015...99 Exhibit 6.10a. Breakdown of Monthly Dividend Fund Assets Under Management by Fund Category, 1997 September 2015...100 Exhibit 6.10b. Percentage Breakdown of Monthly Dividend Fund Assets Under Management by Fund Category, 1997 September 2015...101 C A 8 the Cerulli Report Asset Management in Japan 2015
Expanded table of Contents Exhibit 6.11a. Monthly Dividend Fund Distribution Yield, 1997 September 2015...102 Exhibit 6.11b. Monthly Dividend Fund Performance Indices, 1997 September 2015...103 Exhibit 6.12. Monthly Dividend Fund Assets Under Management and Net Flows by Asset Management Companies, September 2015...104 Exhibit 6.13a. Other Conventional Investment Trust Assets Under Management, 1997 September 2015...105 Exhibit 6.13b. Other Conventional Investment Trust Net Flows, 1997 September 2015...106 Exhibit 6.14a. Breakdown of Other Conventional Investment Trust Assets Under Management by Fund Category, 1997 September 2015...107 Exhibit 6.14b. Percentage Breakdown of Other Conventional Investment Trust Assets Under Management by Fund Category, 1997 September 2015...108 Exhibit 6.15. Other Conventional Investment Trust Assets Under Management and Net Flows by Asset Management Companies, September 2015...109 Exhibit 6.16a. Exchange-Traded Fund Assets Under Management, 1H 2005 1H 2015...110 Exhibit 6.16b. Exchange-Traded Fund Net Flows, 1H 2005 1H 2015...111 Exhibit 6.17a. Exchange-Traded Fund Ownership by Investor Category, July 2012 and January 2015...112 Exhibit 6.17b. Exchange-Traded Fund Availability by Asset Class...113 Exhibit 6.18. Exchange-Traded Fund Assets Under Management and Net Flows by Asset Management Companies, September 2015...114 Exhibit 6.19a. Discretionary Managed Account Assets Under Management, 1H 2005 1H 2015...115 Exhibit 6.19b. Discretionary Managed Account Net Flows, 1H 2005 1H 2015...116 Exhibit 6.20a. Breakdown of Discretionary Managed Account Assets Under Management by Fund Category, 2004 September 2015...117 Exhibit 6.20b. Percentage Breakdown of Discretionary Managed Account Assets Under Management by Fund Category, 2004 September 2015...118 Exhibit 6.21. Discretionary Managed Account Assets Under Management and Net Flows by Asset Management Companies, September 2015...119 Exhibit 6.22a. Defined Contribution Investment Trust Assets Under Management, 1H 2005 1H 2015...120 Exhibit 6.22b. Defined Contribution Investment Trust Net Flows, 1H 2005 1H 2015...121 Exhibit 6.23a. Breakdown of Defined Contribution Investment Trust Assets Under Management by Fund Category, 2004 September 2015...122 Exhibit 6.23b. Percentage Breakdown of Defined Contribution Investment Trust Assets Under Management by Fund Category, 2004 September 2015...123 Exhibit 6.24. Defined Contribution Investment Trust Assets Under Management and Net Flows by Asset Management Companies, September 2015...124 Exhibit 6.25. Subadvised Investment Trust Assets Under Management, 2001 September 2015...125 Exhibit 6.26. Share of Asset Under Management in Funds that Outsource Management (Use Subadvisors), September 2015...126 Exhibit 6.27. Subadvisor Utilization by Investment Trust Management Companies, September 2015...127 Exhibit 6.28a. Breakdown of Equity Investment Trust (Excluding ETF) Assets Under Management by Sales Channel, 1H 2005 1H 2015...128 Exhibit 6.28b. Breakdown of Equity Investment Trust (Excluding ETF) Net Flows by Sales Channel, 1H 2005 1H 2015...129 Exhibit 6.29. Equity Investment Trusts (Excluding ETF) Annualized Redemption Rates by Sales Channel, 1H 2005 1H 2015...130 Exhibit 6.30. Percentage Breakdown of Equity Investment Trusts (Excluding ETF) Assets Under Management by Fund Category, September 2015...131 the Cerulli Report Asset Management in Japan 2015 9 C A
table of Contents Expanded Exhibit 6.31a. Customers Open-End Equity Investment Trust Holdings by Broker, March 2015...132 Exhibit 6.31b. Customers Open-End Equity Investment Trust Holdings by Bank, March 2015...133 Exhibit 6.32. Wrap Account/Separately Managed Account Assets Under Management by Retail Discretionary Managed Account Provider, June 2015...134 Exhibit 6.33. Percentage Breakdown of Discretionary Managed Account Assets Under Management by Fund Category, September 2015...135 Exhibit 6.34. Overview of Nippon Individual Savings Accounts...136 Exhibit 6.35. Cumulative Number of Nippon Individual Savings Accounts Opened by Age Group, March 2014 June 2015...137 Exhibit 6.36. Cumulative Funds Invested through Nippon Individual Savings Accounts, March 2014 June 2015...138 Exhibit 6.37. Overview of Junior Nippon Individual Savings Accounts...139 Exhibit 6.38. Overview of Defined Contribution Pension Plans...140 Exhibit 6.39a. Defined Contribution Pension Plan Participants, March 2005 June 2015...141 Exhibit 6.39b. Breakdown of Defined Contribution Pension Plan Assets Under Management by Asset Class, March 2005 March 2015...142 Exhibit 6.40. Major Proposed Amendments to Defined Contribution Pension Plan Act, April 2015...143 Chapter 7: Pension Funds...144 Exhibit 7.01. Overview of Japanese Pension Systems and Investment Bodies...146 Exhibit 7.02. Major Indices Used as Policy Portfolio/Investment Product Benchmarks...147 Exhibit 7.03. Information Ratio Distributions for Traditional Asset Classes, 3- or 5-Year Term Through to August 2015...148 Exhibit 7.04. Japanese Defined Benefit Pension Assets Under Management, March 2008 March 2015...149 Exhibit 7.05. Japanese Corporate Defined Benefit Pension Asset Allocation by Plan Type, End of Fiscal 2008 2015...150 Exhibit 7.06. Japanese Corporate Defined Benefit Pension Assets Active/Passive Allocations, March 2010 March 2015...152 Exhibit 7.07. Japanese Corporate Defined Benefit Pension Asset Allocations for Alternative Investments, March 2010 March 2015...154 Exhibit 7.08. Japanese Corporate Defined Benefit Pension Managers Assets Under Management, March 2015...156 Exhibit 7.09. Japanese Corporate Defined Benefit Pension Product Distribution Structure...157 Exhibit 7.10. Japanese Corporate Defined Benefit Pension Lead Manager Ranking by Plan Type, March 2015...158 Exhibit 7.11. Japanese Corporate Defined Benefit Pension Consultant Use, March 2015...159 Exhibit 7.12. Japanese Corporate Defined Benefit Pension Major Consulting Firms, March 2015...160 Exhibit 7.13. Japanese Corporate Defined Benefit Pension Major Subadvised/Subadvising Company Relationships by Asset Class, March 2015...161 Exhibit 7.14. Pension Fund Association Assets Under Management and Asset Allocation, March 2009 March 2015...163 Exhibit 7.15. PFA Assets Under Management Breakdown by Management Type and Mandate Winners Through Subadvisory Scheme...165 Exhibit 7.16. Japanese Public Defined Benefit Pension Manager Assets Under Management, March 2015...167 Exhibit 7.17. Government Pension Investment Fund Assets Under Management and Asset Allocation, March 2009 March 2015...170 Exhibit 7.18. Government Pension Investment Fund Mandate Winners and Fee Levels for Foreign Asset Classes, FY2013...172 Exhibit 7.19. Other Major Public Pension Plans Assets Under Management, March 2015...173 Exhibit 7.20. Selected Major Public Pension Plan Asset Allocations, March 2009 March 2015...174 Exhibit 7.21. Japanese Defined Contribution Pension Assets Under Management, March 2009 March 2015...176 Exhibit 7.22. Japanese Defined Contribution Pension Asset Allocation, March 2011 March 2014...177 C A 10 the Cerulli Report Asset Management in Japan 2015
Expanded table of Contents Chapter 8: Financial Institutions...179 Exhibit 8.01. Balance of Investment Securities (All Banks), March 2005 March 2015...182 Exhibit 8.02. Balance of Investment Securities by Asset Class (All Banks), March 2005 March 2015...183 Exhibit 8.03. Composition of Investment Securities by Asset Class (All Banks, Excluding Overseas Branches), March 2005 March 2015...184 Exhibit 8.04. Balance of Other Securities (All Banks, Excluding Overseas Branches), March 2005 March 2015...185 Exhibit 8.05. Balance of Investment Securities by Bank Type (Including Overseas Branches), March 2010 March 2015...186 Exhibit 8.06. Composition of Investment Securities by Bank Type (Including Overseas Branches), March 2010 March 2015...187 Exhibit 8.07. Balance of Other Securities by Bank Type (Excluding Overseas Branches), March 2005 March 2015...188 Exhibit 8.08. Composition of Other Securities by Bank Type (Excluding Overseas Branches), March 2005 March 2015...189 Exhibit 8.09. Investment Securities to Deposit Ratio by Bank Type, March 2005 March 2015...190 Exhibit 8.10. Loan to Deposit Ratio by Bank Type, March 2005 March 2015...191 Exhibit 8.11. Yields on Loans and Investment Securities (All Banks), March 2005 March 2015...192 Exhibit 8.12. Yield on Loans by Bank Type, March 2005 March 2015...193 Exhibit 8.13. Yield on Investment Securities by Bank Type, March 2005 March 2015...194 Exhibit 8.14. Loans Outstanding (All Banks), March 2005 March 2015...195 the Cerulli Report Asset Management in Japan 2015 11 C A
Company Index CoMPANY INDeX AllianceBernstein...66 Ashmore Investment Management...66 Bank of Japan...12, 26, 27, 83, 84, 111, 112, 179, 182, 183, 187, 188, 192, 194, 195 BlackRock...66, 156, 169 Brandywine Global Investment Management...66 Capital International...65 Cohen & Steers...46 Colchester Global Investors...66 Daiwa Asset Management...89, 90, 97, 109, 119, 127 Daiwa SB Investments...65, 104, 156 Daiwa Securities...24, 78, 132, 135 DBS Asset Management...39 DIAM...156 Eastspring Investments...65 Fidelity Investments Japan...90, 109 Fidelity Worldwide Investment...65 Fischer Francis Trees & Watts...66 Franklin Advisers...66 Goldman Sachs Asset Management...66 Harris Associates...65 Insight Investment Management...66 Invesco Asset Management...65 J.P. Morgan Asset Management...65 Janus Capital Management...66 Japan Post Bank...25, 27, 28, 29, 32, 75, 80, 81 Japan Post Insurance...25 LaSalle...46 Lehman Brothers...84 Loomis Sayles...66 MacKay Shields...66 Manulife Asset Management...66 MFS Investment Management...162 Mitsubishi UFJ Kokusai Asset Management...97, 124, 127 Mizuho Asset Management...65 Morgan Stanley Investment Management...66 C A 196 the Cerulli Report Asset Management in Japan 2015
Nikkei Group...160 Nikko Asset Management...38, 49, 90, 127 Nissay Asset Management...104 Nomura Asset Management...49, 65, 89, 90, 97, 104, 114, 119, 124, 127, 139, 156 Nomura Corporate Research and Asset Management...66 Nomura Funds Research and Technologies (NFR&T)...160 Nomura Group...160 Nomura Research Institute (NRI)...12, 23, 24, 46, 54, 55, 85 Nomura Securities...24, 78, 132, 135, 160 Northern Trust...169 Okasan Asset Management...104 Pictet...104 PIMCO...46, 66 Prudential Investment Management...66 Pyramis Global Advisors...66 Rating and Investment...12, 160 Russell Investments...65, 166 Schroder Investment Management...65, 66 Shinko Asset Management...90 SMBC Nikko Securities...134 State Street Global Advisors...169 Standish Mellon Asset Management...66 Sumitomo Mitsui Asset Management...109, 156, 162 Sumitomo Mitsui Banking Corporation...133 Sumitomo Mitsui Trust Asset Management...90, 119, 124 Sumitomo Mitsui Trust Bank...133, 135 Taiyo Pacific Partners...65 Tokio Marine Asset Management...156 Towers Watson...160, 166 Tyndall Investment...39 UBS Global Asset Management...66 Vontobel...162 Wells Capital...162 Company Index the Cerulli Report Asset Management in Japan 2015 197 C A