Massachusetts Financial Services plans to launch five mutual funds in Japan early next year, giving the Boston fund company full-fledged entry into fund management there.

Last week it got regulatory approval to manage retail funds in Japan and hopes to sign agreements with six distributors by the time the funds are opened to investors, said Robert Di Bella, president of Massachusetts Investment Management Co., the Japanese unit.

Three funds - a limited-maturity fixed-income portfolio; a Japanese all-cap portfolio; and a Japanese blue-chip portfolio - are to be launched in late February or early March. A U.S. high-income bond fund and a global equity portfolio will come shortly after, Mr. Di Bella said.

Though its fund market is relatively small, Japan - with the second-largest economy in the world, the highest savings rate, and a largely underfunded pension system - is an ideal market for asset management companies. Indeed, the mutual fund market there is expected to swell 44% by 2003, according to a report by Cerulli Associates Inc. of Boston.

Based on data from Cerulli and Friday's currency conversion rate, assets under management in Japan totaled $1.99 trillion in October. By contrast, the U.S. fund industry topped $6 trillion, according to the Investment Company Institute.

Massachusetts Financial is a late entrant to fund management in Japan. For example, Goldman Sachs Asset Management had $14.1 billion of assets under management there in December 1998, according to Cerulli, and other large players include Putnam Investments, Alliance Capital Management, Fidelity Investments, and Merrill Lynch Mercury Asset Management.

The Boston company, which manages about $130 billion of assets worldwide, also faces stiff competition from Japanese asset managers, which are expected to gain market share, according to Cerulli.

Mr. Di Bella says he is undeterred. "We may be late to the dance, but the music is just starting," he said.

He added that the company plans to stay in Japan for the long haul. "When Toyota decides to leave America, we'll probably leave Japan," Mr. Di Bella said.

The fund company's involvement there began a few years ago when it agreed to subadvise a global-balanced portfolio with Nomura Asset Management. And in the summer of 1998, it tapped Merrill Lynch Japan to distribute a Japan-only share class of two U.S.-based funds. That October it opened an office in Japan and applied for a license to manage institutional assets, which it received in January.

The fund company has a staff of 17, and Mr. Di Bella said he plans to hire three people in the first half of next year for operations, sales, and marketing. The company also plans to hire analysts, though Mr. Di Bella said he did not know how many or when.

Massachusetts Financial also has plans within three to five years to offer U.S.-style wholesaling, which is almost unheard of in Japan, Mr. Di Bella said.

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