Investment Management

GlobalView

SPECIAL REPRINT FROM GLOBALVIEW - ISSUE 2 2011

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Global Asset Managers Gain Market Access in Japan

A Perfect Fit

Feature Article

Global Asset Managers Gain Market Access in Japan

Michael Saunders

Managing Director Offshore Relationship Management

ver the past few years, there has been significant growth in offshoredomiciled funds sold into the Japanese market. Both domestic and global asset managers are benefiting from this trend and utilizing offshore funds as a complement to their existing local fund strategies. Today, offshore funds are being used to support more complex strategies which are driven by the global requirements of the funds as well as from a portfolio investment perspective. “DOUBLE-DECKER” FUND TRENDS An example of a fast-growing area of offshore funds is the “double-decker” fund phenomenon, which emerged in mid-2008. This product offers a unique structure in that investors can gain exposure to a portfolio asset class as well as a currency overlay strategy in the share class. The double-decker fund business is a significant segment, comprising in excess of $100 billion in assets and represents approximately 14 percent of the Japanese retail mutual funds market, according to data produced by Nomura Asset Management Co. Ltd. Brown Brothers Harriman (BBH) has achieved substantial credibility in the double-decker space, securing nearly 50 percent of the market share in terms of the number of funds/share classes serviced.

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Double-decker funds were initially structured to have core portfolio investments in high-yield and emerging-market fixed income instruments. That asset class still dominates the overall segment composition. However, over the past six months, we have begun to see a shift in product development trends to include both real estate and equity products that invest in developed markets, such as the U.S., Japan and Canada. Approximately 80 percent of doubledecker...