Certain factors shaping the Japanese economy, including the aging demographic make-up of its population, the state of the investment industry, and the accumulated wealth of households, are paving the way for solid business opportunities for Australian fund managers, PricewaterhouseCoopers (PwC) and Austrade said in a report.
These characteristics of the Japanese market were identified in a report compiled by accounting firm PwC and Austrade entitled The Australian Fund Manager’s Roadmap to Japan.|
In regard to the population demographics, Japan is having issues funding its aging population.
“Like most countries across Asia, Japan is facing a pension crisis. It was announced recently that pension payouts from public pension plans last year were $600 billion. That represents 10 per cent of their GDP,” PwC Australia wealth management leader Andrew Wilson said.
In this context, public pension plans will need to achieve higher returns, a situation in which Australian fund managers can offer assistance and experience, according to Wilson.
There is also a shift in the products being sought after by the Japanese investment industry, with equities and debt from emerging markets and other foreign markets in general expected to receive the highest investor demand in coming decades.
“There is a mismatch between the expertise resident in the domestic fund managers in Japan and where that growth is going to be, highlighting the opportunities for Australian find managers to bring that expertise to that market,” Wilson explained.
A further favourable factor for Australian fund managers looking to service the Japanese market is the wealth of the individual investor in that country.
“Access to the assets of Japanese households is without a doubt seen as the Holy Grail of the assets management industry. When you look at the size of it, household wealth is estimated to be $15.5 trillion,” Wilson said.
“Of that household wealth, only 3.6 per cent is invested in unit trusts. Again, that compares to an average in the US of 12 per cent. So that highlights the opportunity there is for growth in the industry – but also highlighting the small penetration that investment trusts have at the moment,” he said.
According to Wilson, some fund managers are already experiencing significant inflows from Japan, with AMP Capital Investors managing $7 billion in assets sourced there.
