The trend of foreign exchange brokers venturing into investment management appears to be accelerating with the latest piece of news coming in from Japan. Monex Inc expanded its existing partnership with Credit Saison and has added one of the most popular asset management companies in the world, Vanguard, to jointly establish a discretionary investment management firm.
The news comes at a great time for Japanese investors as the Government Pension Investment Fund published its latest quarterly performance results this morning. The world’s biggest pension fund lost over $64 billion as the turbulent month of August impacted its performance substantially.
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Monex has the opportunity to enter into a space that is becoming increasingly more competitive but also progressively popular thanks to the meager returns offered by government bonds. Apparently, in Japan, the business has much more potential due to the tight government control over the holdings of the largest pension fund in the world.
The holdings of the fund totaled 135.1 trillion Japanese yen ($1.1 trillion) and the substantial drop last quarter put the policies prescribed by Abenomics into further questioning.
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Monex-Saison-Vanguard Investment Partners led by Representative Director & President, Hiroshi Aikawa, will be launching its operation in the spring of 2016 with the impact on the financial performance of Monex for the fiscal year ending in March next year expected to be insignificant.
Meanwhile, the risky policy decisions taken by the Japanese government and the Bank of Japan in 2013 are starting to affect the infamous Japanese savings. Companies such as Monex Japan could be a much safer asset management alternative than the government scheme, which is still heavily invested in the country’s sovereign debt paper, while the debt to GDP ratio of Japan approaches 250 percent.
Despite having returned over 12.3 percent in returns during 2014, the fund has apparently taken an enormous amount of risk. Losing 5.6 percent in a single quarter doesn’t seem like a diversified enough approach for preserving the savings of the whole nation.
The partnership in which Japanese brokerage Monex has entered into is opening the company’s doors to the 35 million client base of Saison. At the same time, Vanguard Group’s financial expertise, coupled with the technology that Monex can provide, may target retail investors with customized tailored solutions.
The space has already been actively explored by IG Group, as the UK brokerage partnered with Blackrock in July. To complement its technological capabilities, the company has also purchased a tailored asset management product developer – InvestYourWay.