FinCity.Tokyo (FCT), an organization to promote Tokyo’s financial ecosystem, (https://investmentjapan.jp/japans-basic/1010/, https://fincity.tokyo/en/) held its latest “Tokyo Asset Management Forum (TAMF)” on November 15, 2022, to encourage asset owners to consider diversifying their asset managers. About 370 asset managers and asset owners, both onsite and online, attended the first in-person forum held in the 3 years since COVID-19. Soken Inc., publisher of IJ, AL-IN, Ma-Do, etc., was the event’s media partner.
Below is a summary of the forum, based on a report by AL-IN Web on December 15.
TAMF 2022 Autumn offered keynote speeches, panel discussions, fireside chats, and presentations by 13 emerging and relatively new asset managers who are expected to spearhead the diversification of Japan’s financial scene.
|In opening remarks, Executive Director Keiichi Aritomo emphasized FCT’s efforts to enhance the investment chain -- a virtuous cycle of funds, investors, investment targets, and asset managers -- through its “Emerging Managers Program (EMP)” by bringing together investment funds and emerging asset managers (https://investmentjapan.jp/managers/1025/).||
|In the first keynote address on “Asset Management Sophistication through Asset Allocation Strategies”, Grace Qiu of GIC, a sovereign wealth fund from Singapore, noted that with interest rates rising and both stocks and bonds falling, a portfolio strategy consisting solely of traditional assets is limited. She emphasized the need to shift toward advanced portfolios to achieve long-term investment performance and increase the portfolio's resilience to macro uncertainties and heightened geopolitical risks. Doing so, she explained, requires greater emphasis on long-term portfolio resilience while accepting short-term fluctuations in volatility by incorporating diverse assets, such as private markets, and using excess returns and the risk management skills of asset managers.|
|In the 2nd keynote speech on “Key Investment Principle of the University Fund”, Naoya Sugimoto of Japan Science and Technology Agency (JST) introduced the “10-trillion-yen university fund”, which JST began managing in early 2022, and outlined his plan to make JST a more mature institutional investor. Sugimoto explained JST’s objective, governance structure and management strategies, to wit: an annual return target of 4.39% or more and investments including alternative assets, such as private equity and infrastructure, within a certain risk tolerance. The fund seeks to secure financial resources for Japan’s top-ranked universities with investment income derived from the global capital market. While university endowments are not yet major asset owners in Japan, the JST fund serves as a management model for universities that eventually do establish their own funds.|
|Yuri Adachi of Financial Services Agency delivered the last keynote speech on “Enhancing the Asset Management Business”. She pointed out that Japanese investment funds have higher management costs than those in the US and the EU, due in part to personnel practices unique to Japanese private financial institutions. For example, senior management at asset management companies belonging to major financial groups are often dominated by people from the parent company, who lack experience in asset management. While companies have started to tap more outside executives, there are still few women or non-Japanese serving as directors. Adachi argued for the necessity of maintaining a diverse environment that fosters new ideas. She concluded by emphasizing that asset managers should be evaluated on management capability, rather than sales capability, and reminded attendees that the government welcomes and supports emerging asset management firms.||
The first panel discussion of the TAMF, “Industry Leaders’ Vision and Expectations of Emerging Managers” dealt with the potential of emerging managers. The panel included Akira Sugano (President & CEO, Asse Management One), Yoshio Hishida (Representative Director & President, Sumitomo Mitsui Trust Asset Management ), Fumiyo Harada (Managing Executive Officer, Development Bank of Japan), and Hidekazu Ishida (EMP Special Advisor, FCT). Panelists remarked that Japanese institutional investors tend to fall prey to the "track record supremacy" principle of seeking good past performance, which makes it difficult for funds to hire emerging asset managers. For Tokyo to regain its luster as an international financial center, the panel urged government, municipalities, and other public organizations to play a more central role in creating an environment that attracts private-sector funds.
|A fireside chat followed, focusing on “Asset Management Sophistication through Academic Research” and led by Two Sigma, a major US hedge fund with strength in quant management using artificial intelligence. David Siegel, Co-Chairman of Two Sigma, explained that a future in which we can predict markets that were once considered unpredictable is feasible, just as the use of big data has improved the accuracy of weekly weather forecasts. Kenny Lam, CEO of Two Sigma Asia Pacific, emphasized that advances in data science will also contribute to the development of ESG investments.||
The final program at TAMF was a panel discussion on “University Efforts to Advance Asset Management and Create Innovation” by panelists from 4 private universities that have established their own endowment funds. Participants included Ryoichi Arai (Director of Endowment, International Christian Univ.), Hiroaki Ohta (Co-Chairman/General Partner, WASEDA Univ. Ventures), Yuichi Katayori (Managing Partner, Tokyo Univ. of Science Innovation Capital) and Masafumi Hikima (Special Advisor, Sophia Univ.). After giving overviews of each university’s investment policy and fund, panelists explicitly stated their desire to hire emerging asset managers, to "consider investment targets even if [managers] do not have a track record" and to "hire firms that can demonstrate their expertise in distinctive asset management”. The panel also discussed how university asset management can harness investment in Japanese startups to earn a profit and address social concerns at the same time.
The 3-and-a-half-hour TAMF 2022 Autumn successfully introduced asset owners to notable emerging managers with whom they were mostly unfamiliar. Overall, attendees gain a greater understanding of efforts to increase sophistication of Japan’s asset management business and make Tokyo a more competitive international finance center.
About Tokyo Asset Management Forum 2022 Autumn: https://fincity-emp.tokyo/data/tamf_202211.pdf