Foreign Asset Managers In Japan Pay More To Outsource Than Domestics - Cerulli

Tom Burroughes

10 April 2014

Foreign asset managers doing business in Japan spend more on outsourcing activity not related to investment management than domestic firms in the Asian country, but the gap is even bigger when it comes to salaries, a report said yesterday.

Outsourced research expenses account for more than 20 per cent of both foreign and domestic asset managers' revenues, the report by said. For domestic managers, outsourced research expenses go mainly to unaffiliated global sub-advisors. For foreign managers, they flow mainly to their parent company or another overseas affiliate.

To keep costs on a tight leash, some domestic asset managers are trying to take in-house asset management capabilities in foreign assets that they used to seek from sub-advisors through mergers and acquisitions. The report cites the example of Nikko Asseet Management, which created its own management capacities by acquiring Tyndall Investment Management in Australia and DBS Asset Management in Singapore.

The report is called Asset Management in Japan 2013: Opportunities and Challenges for Foreign Managers.

Foreign managers spend a total of 39 per cent, which is 12 percentage points more than domestic managers' annual spend in this area, the report said. "This suggests that foreign managers prefer a flexible and individual approach to pay," says Yoon Ng, Asia Research Director for Cerulli Associates.