The largest Asian entrant in IPE’s Top 400 asset management survey for 2018 was Japan’s Sumitomo Mitsui Trust Bank ranked at 24. Yet the bank will no longer feature this year as it has transferred its asset management division, which dealt largely with pension funds, to a sister company. Sumitomo Mitsui Trust Asset Management (SMTAM), previously a retail institution specialising mainly in mutual funds, absorbed the institutional assets of the trust bank last October.
● 2018–present: Executive co-chairman of Sumitomo Mitsui Trust Asset Management (SMTAM).
● 2014-2018: Executive Chairman of Nikko Asset Management.
● 2004-2014: Various positions at Barclays including head of the wealth management business in the UK and Ireland, chairman of Barclays Asset Management, CEO for Europe and Asia for Barclays Global Investors, president of BGI Japan Trust & Banking.
● 1992-2004: Various roles in asset management and capital markets for Merrill Lynch. President of Merrill Lynch Investment Managers Japan from 2002 to 2004.
● 1987-1992: Manager at Sanyo Securities.
● BA in political science from the University of Florida and masters degree in education from Temple University
Sumitomo Mitsui Trust Asset Management (SMTAM)
● Manages about $572bn (€502bn) in assets (December 2018)
● Number of officials and employees 545 (October 2018)
● Wholly owned by Sumitomo Mitsui Trust Holdings. The holding company also owns Sumitomo Mitsui Trust Bank, one of Japan’s largest trust banks
The reorganisation has advantages both for the trust bank and SMTAM. For the bank, it allows for better governance by removing conflicts of interest between lending and investment management. “Japan, from a governance perspective, has really moved ahead from where it was just a couple of years ago,” says David Semaya, SMTAM’s executive chairman. For the asset manager, the shift helps to provide greater economies of scale. Both companies remain subsidiaries of Sumitomo Mitsui Trust Holdings.
SMTAM’s enlargement seems to be part of a more general shift in which institutional asset management is coming to be seen as a distinct business line. It is a move that was preceded by the creation of Asset Management One with the merger of several entities including the asset management division of Mizuho Trust (see Strategically Speaking, January 2017). It should also be noted Sumitomo Mitsui Trust Holdings has a
90% holding in Nikko Asset Management, although the business is managed independently. However, not all trust banks have gone down that route. Most notably, Mitsubishi UFJ retains asset management within the bank.
SMTAM has ambitious plans to widen its international expansion. It intends to extend its reach in Europe, the US and Asia. Investment into Japanese equities and fixed income will be among its key strengths. For example, at present SMTAM has five pan-European UCITS funds investing in Japanese equities. It also has a white-labelling business.
The firm’s international ambitions are not confined to managing Japanese assets. Semaya says the firm will place a lot of effort into index investing in global equities. “It is a business we would love to focus on and expand in Europe as well,” he says.
This could include tailored solutions. “We are open to working closely in partnership with clients,” he says.
Semaya’s appointment itself is, at least partly, a sign of SMTAM’s international ambitions. His role includes specific responsibilities for the international development of the business. Before he took up his new position
last May he played a similar role for four years in helping to bolster Nikko’s global presence (see Strategically Speaking, May 2016).
Indeed. Semaya is a rare non-Japanese individual qualified to provide a link between Japanese finance and the rest of the world. He is one of a select band of foreigners with senior investment experience who is also fluent in Japanese.
The new SMTAM has emerged after a turbulent few decades for Japanese financial institutions. It can be seen as part of a new generation of Japanese asset managers which has been forged from the remnants of numerous financial mergers. In that respect at least it is similar to Asset Management One and Nikko.
Indeed, Sumitomo Mitsui Trust’s pedigree as the product of mergers is embedded in the name. The two entities, Sumitomo and Mitsui, evolved into large corporate groupings each consisting of numerous companies.
But the breakdown of the old barriers between these groupings dates back to the collapse of the ‘bubble economy’ (baburu keiki) of the 1980s. Back then, equity and land prices reached absurd levels. At that time it was widely believed that Japanese financial institutions were destined for world domination. Japanese financial firms were, by many measures, the largest in the world. Many expected Japan to take over from the US as the world’s largest economy by the turn of the century, while China was barely an afterthought in the discussion of the Asian economy.
For reasons that need not detain us here, this edifice collapsed from the early 1990s onwards as both equity and land prices slumped. Many financial institutions encountered severe difficulties with venerable old names disappearing and others being amalgamated. After almost three troubled decades, a new set of financial institutions have established themselves.
An important indicator differentiating SMTAM from the past is its embrace of ESG. “ESG is becoming much more important to Japanese clients, especially pension funds,” says Semaya. In recent years the focus has been mostly on the G of governance, as that is in line with Abenomics reform.
In the coming years, Semaya expects the E and S in ESG to become an important focus. “There is absolutely hands-on engagement from top to bottom in the firm,” he says. It is another sign that Japanese asset managers have in important respects transformed themselves.