JAPAN - Fidelity is on the verge of making a string of new hires to enhance its client relationship capabilities in the Japanese defined benefit pensions market, at a time when many managers are scaling down their efforts in this segment.
On the back of daiko henjo, which saw a huge manager cull of both Japanese and foreign fund managers, many managers argue the Japanese pensions business is no longer a profitable market to be in.
However, Takeshi Okazaki, executive director, head of pension and institutional business at Fidelity in Japan, disagreed.
“It is true that post ‘daiko henjo’, the private pension market will have limited growth potential, and therefore it may not be an attractive business for asset managers who do not have a presence,” he said.
“But Fidelity already has a significant DB client base, and we see there is an opportunity to win a further piece of the market.”
Daiko henjo was the process whereby from September 2003, plan sponsors were allowed to transfer the contracted-out portion of their pension assets back to the government to reduce pension deficits.
Okazaki added that Fidelity would look to take advantage of the shift from the pursuit of alpha to beta diversification.
“While traditional assets such as Japanese and global equities will continue to be important, we will also be focusing on solutions that include non-traditional assets, and asset allocation expertise,” he said.
Commenting on beta diversification, Makiko Hakozaki, associate director, pension strategy, pension client services, Russell Investments Japan, said: “Pension plans are thinking more about the long term and how they can diversify the beta or alpha risk. They are looking at how they can manage that portion and keep returns high going forward.”
Hideki Takayama, senior managing director and CIO of State Street Global Advisors (Japan), said: “Some plan sponsors have a challenge in how they deal with Japanese fixed income as an asset class. Some are trying to replace the fixed income with Libor plus-type instruments.”
He added: “If the concept of liability driven investment becomes more popular among Japanese pension plans, and if the yield curve is extended further or there is more activity in inflation hedge-type instruments, it will be easier for pension plans to position this asset class.”
By Kristen Paech
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.