The U.S. banking operation of Industrial Bank of Japan Ltd. is negotiating to buy two U.S. investment management firms, its president said.
One, an institutional asset manager, would be bought largely to attract more Japanese investors, said Dennis G. Buchert, president and chief executive officer of IBJ Whitehall Financial Group. The other firm manages customized portfolios for wealthy individuals, he said.
The institutional manager would dovetail with IBJ Whitehall's Innovest Capital Management, half of whose $600 million under management is advised for Japanese accounts. Innovest manages equity investments, including some hedge funds; the institutional boutique manages fixed-income investments, which are attractive to conservative Japanese investors, Mr. Buchert said.
The private client firm would be bought to enhance IBJ Whitehall's wealth management business, which was expanded last summer with the acquisition of a similar firm last summer, Delphi Asset Management Inc. Delphi manages $850 million of assets.
IBJ's plans mirror those of U.S. investment managers that are trying to set up shop in Japan. The recent "big bang" reforms there let foreign investment managers advise pension assets and sell mutual funds in the country.
"All the other investment management companies are scrambling to get a toehold" in Japan, mostly "through loosely defined partnerships and alliances," Mr. Buchert, said.
Headquartered in New York, IBJ Whitehall is a $2.5 billion-asset company with offices in Atlanta, Boston, Cleveland, and Miami. Until recently, when London-based Schroders PLC sold its 2.7% stake to Industrial Bank of Japan, the U.S. operation was called IBJ Schroder Bank and Trust.
In Japan, Industrial Bank of Japan is aligned with the brokerage Nomura Securities Co. and Dai-Ichi Mutual Life Insurance Co., creating a dynamic with a "Citigroup ring to it," Mr. Buchert said.
One aspect of the partnership between Dai-Ichi and IBJ, which own stakes in each other, is marketing investment trusts, the Japanese version of mutual funds. In a joint venture, IBJ and Nomura are offering asset management and investment trusts to corporate pensions.
Other Japanese-owned U.S. banks are also advising investments for their parent's clients.
Los Angeles-based Sanwa Bank California, which has $8.4 billion of assets, is subadvising close to $300 million of assets in U.S. equity investment strategies for over 100 accounts in the Tokyo asset management subsidiary of its parent, Sanwa Ltd. It also advises two Japanese investment trusts: one invested in U.S. bonds, the other in a global sector rotation strategy.
"Sanwa, both in Tokyo and here, is in the catbird seat to capture whatever the potential is in that market," said Richard A. Weiss, chief investment officer of Sanwa Bank California, which manages $2.5 billion of assets for its U.S. clients.
Similarly, Unionbancal Corp., based in San Francisco, subadvises over $200 million of assets invested in U.S. equities for pensions managed in Japan by the investment subsidiary of its majority shareholder, Bank of Tokyo-Mitsubishi. Also, Unionbancal's Highmark Capital Management was retained last month to subadvise a U.S. equity investment trust introduced by Tokyo-Mitsubishi Asset Management, said Clark Gates, president of Highmark.
Before deregulation, pension assets in Japan were managed by trust banks and life insurance companies, and investment trusts were only sold by Japanese brokerages.
"There is now demand for investments in non-Japanese instruments, so there's a lot of demand for expertise," said Linda M. Chase-Jenkins, a managing consultant at Tillinghast-Towers Perrin in New York.