JAPAN - Fund managers have seen assets under management in mandates from Japanese pension schemes jump by 20.2% in the year to March 31.
The mandates, worth ¥94.3trn (US$953bn), was shared among 119 firms, the Japan Pension Industry Database (JPID) said, half of them domestic houses and half from overseas. For the first time, domestic firms earned more business than their overseas competitors, with combined assets under management of ¥52trn.
BlackRock Japan was the biggest winner, bringing in ¥18.2trn and knocking Sumitomo Trust & Banking (¥15.1trn) from the top spot. In third place was Mizuho Trust & Banking, with ¥11.2trn.
BlackRock's leap from 10th to first place in the rankings follows its takeover of Blarclays Global Investors (BGI) last year. BGI, a specialist in passively managed Japanese equities, had always battled for the top spot with domestic house Diam.
Japan has the second largest pool of work-based pensions in the world after the US, but unlike many western countries 99% of its savings remain in defined benefit schemes. This makes the country attractive to managers looking to win large, specialist mandates rather than mutual funds used by defined contribution plans.
The research, compiled by JPID from returns submitted to the Japan Securities Industry Investment Advisors Association (JSIAA), do not reveal whether the rise in assets under management came from new business inflows or investment performance, although it does reveal the number of mandates issued actually fell from 5267 to 5203 over the year.
However, Database head Jo McBride said the figures were misleading. "Members' returns show only mandates held, not the number lost or won," McBride said. "There is lively turnover in this market, especially with funds looking to increase yield and venturing more into alternatives, and mandates are getting bigger.
McBride said the search for yield and consequent shift in asset allocations have picked up as companies find themselves paying out more in benefits than they receive in contributions.
In 2008, 40% of DB schemes faced this problem and from 2012 the problem will intensify as Japan's baby boomers start to retire.
At the same time, the country's workforce is in continuous decline. In 2000 some 86.4 million people were aged between 15 and 64, accounting for 68.1% of a population of 126.9 million. By 2015 it will have fallen to 61.2% of a population of 126.3 million people. Over half of these will be women, who are not well represented in Japan's workforce.
And just as individual investors have sought out foreign bond funds during tough times, so its pension schemes will do the same.
McBride added: "Pension schemes will go increasingly overseas, building on the 20% of their portfolios already there and creating opportunities for the foreign and domestic money managers equipped to do their business."
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