NRI and Casey Quirk Jointly Publish White Paper
Addressing Management Challenges Faced by Japanese Fund Managers
Addressing Management Challenges Faced by Japanese Fund Managers
May 17, 2010
Nomura Research Institute, Ltd.
Nomura Research Institute, Ltd.
Nomura Research Institute, Ltd. (NRI: Tokyo; Tadashi Shimamoto, President, CEO & COO) jointly prepared a white paper addressing the management challenges faced by Japanese fund managers with Casey Quirk (CQ: Darien, Connecticut; John Casey, Chairman), a US management consulting firm serving the global asset management industry.
This paper recommends that Japanese asset managers make significant changes in their business models to strengthen their competitive positions. While Japan’s fund managers operate in the world’s third-largest pool of professionally managed assets, approximately 80 percent of Japanese mutual funds generate insufficient fee revenue to cover costs. The overwhelming reliance on domestic products results in losing opportunities for growth that could be expected from global asset management. Furthermore, their method of compensation lacks flexibility.
According to analyses by NRI and CQ on data from almost 70 fund managers in the US, Canada and Europe, and more than 100 Japanese asset management firms, profit margins for Japanese fund managers were approximately 20 percent, which is low in comparison to over 30 percent for their US counterparts and almost 40 percent in Europe. In addition, because of the salary-based compensation structure of Japanese asset managers, the percentage of overall compensation in total expenses rose even though revenue fell during the financial crisis. In contrast, compensation among US money managers relative to total expenses fell because bonuses were flexibly cut.
Based on these research and analysis results, we believe that Japan’s fund management sector needs to develop attractive products such as those that are focused on fast-growing Asian economies and move to a more incentive-based method of compensation to appeal to key talent and add clients at home and abroad, thereby increasing profit margins to global industry levels.
This white paper is available through download from NRI’s portal site “NRI Financial Solution”
(http://fis.nri.co.jp/report/pdf/nri_cq_201005_e.pdf)
About Casey, Quirk & Associates LLC Casey Quirk provides management consulting services solely to investment management firms. CQ offers consultation for a variety of fields such as the development of business strategy, improvement of investment processes and the design of marketing plans. By drawing on over 20 years of experience, CQ has built trust among its clients by offering specific solutions exclusively to investment management businesses.
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This paper recommends that Japanese asset managers make significant changes in their business models to strengthen their competitive positions. While Japan’s fund managers operate in the world’s third-largest pool of professionally managed assets, approximately 80 percent of Japanese mutual funds generate insufficient fee revenue to cover costs. The overwhelming reliance on domestic products results in losing opportunities for growth that could be expected from global asset management. Furthermore, their method of compensation lacks flexibility.
According to analyses by NRI and CQ on data from almost 70 fund managers in the US, Canada and Europe, and more than 100 Japanese asset management firms, profit margins for Japanese fund managers were approximately 20 percent, which is low in comparison to over 30 percent for their US counterparts and almost 40 percent in Europe. In addition, because of the salary-based compensation structure of Japanese asset managers, the percentage of overall compensation in total expenses rose even though revenue fell during the financial crisis. In contrast, compensation among US money managers relative to total expenses fell because bonuses were flexibly cut.
Based on these research and analysis results, we believe that Japan’s fund management sector needs to develop attractive products such as those that are focused on fast-growing Asian economies and move to a more incentive-based method of compensation to appeal to key talent and add clients at home and abroad, thereby increasing profit margins to global industry levels.
This white paper is available through download from NRI’s portal site “NRI Financial Solution”
(http://fis.nri.co.jp/report/pdf/nri_cq_201005_e.pdf)
About Casey, Quirk & Associates LLC Casey Quirk provides management consulting services solely to investment management firms. CQ offers consultation for a variety of fields such as the development of business strategy, improvement of investment processes and the design of marketing plans. By drawing on over 20 years of experience, CQ has built trust among its clients by offering specific solutions exclusively to investment management businesses.
To List of Press Releases
Copyright(c) 2010 Nomura Research Institute, Ltd. All rights reserved.
No reproduction or republication without written permission.
No reproduction or republication without written permission.