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Nomura’s CEO is on the hunt for global acquisitions to expand the asset management business of Japan’s largest brokerage and investment bank.
Kentaro Okuda said in an interview with the Financial Times that the bank was making a strategic shift towards asset management and adopting a consultancy mindset.
As part of the shift into the private equity and private credit markets, Okuda wants Nomura to expand its global asset management capabilities in preparation for a generational shift in Japanese investment habits.
“One of the targets for M&A is asset managers outside Japan that are very strong in alternative assets,” Okuda said at the bank’s Tokyo headquarters. “A second target is the advisory type of business, also outside Japan.”
After being appointed the bank’s CEO in 2020, Okuda said his mission was to cut costs and reduce Nomura’s reliance on volatile trading and investment banking revenue streams.
But his first term was spent dealing with the fallout from the 2021 implosion of Bill Hwang’s Archegos Capital. Nomura reported a $2.9 billion hit from the collapse.
The bank and brokerage are preparing to take advantage of the expected shift of Japanese household wealth from cash and deposits into higher-yielding investments.
With the percentage of assets Japanese investors putting into private equity and private debt approaching zero, Okuda expects household and institutional investment in these types of alternative assets to increase.
According to the Bank of Japan, Japanese households currently hold about half of their total ¥2.2 trillion ($13 trillion) of financial assets in cash and deposits.
But banks and analysts expect that central banks’ normalizing monetary policies and the return of persistent inflation will prompt people to reconsider their savings strategies. A wave of inheritances expected to be passed down by boomers born after World War II is also expected to upend investment habits.
Major global private equity firms, including Blackstone and Carlyle, have stepped up campaigns to lure Japanese individuals into their funds, preparing for major financial institutions such as Japan’s Government Pension Investment Fund to buy more of its asset portfolio worth ¥226 trillion in alternative investments. investments.
In May, Morgan Stanley MUFG analysts published a note predicting a “momentous change” in Japan’s wealth and asset management industry and the billion-dollar revenue opportunity for Japanese banks and rivals competing for the business of wealthy and “wealthier” clients.
Nomura has renamed its once notoriously aggressive retail brokerage business to the “Wealth Management” division, underscoring its shift to offering higher-value services including investment advice.
Okuda said the bank wanted to change the attitude of its hard-selling brokers. “The mindset is changing from the broker to the consultant,” he said.
He added that to expand the bank’s reach to wealthy customers, Nomura would build on a series of alliances with regional Japanese banks formed in 2019, breaking a long tradition of going it alone.
Okuda acknowledged that Nomura would face increasing competition in asset management from Japanese megabanks MUFG, SMBC Group and Mizuho, as well as foreign groups such as UBS.
“It would be better for us if we had no one to compete with in this market,” Okuda said, but he added: “Of course, there will be competitors from abroad entering the market, just like the [Japanese] mega banks and others, I think they are already here and competing.