Japan's vast pool of low-yielding personal savings remains a magnet for American financial services providers that see a way to make money by managing these assets. The latest company to try to tap these funds is PAINEWEBBER GROUP INC. It has teamed up with YASUDA MUTUAL LIFE INSURANCE CO. and that company's YASUDA CAPITAL MANAGEMENT CO., LTD. to develop, sponsor and manage mutual funds and other retail asset management products. PaineWebber, the number-four U.S. brokerage house, has a 45 percent stake in Tokyo-headquartered YASUDA PAINEWEBBER MUTUAL FUND CO., which will begin operations in April. The joint venture will use the life insurer's nationwide sales force of more than 15,000 people to market such investment products as money market mutual funds, 401(k)- equivalent pension plans incorporating mutual funds and mutual fund wrap accounts. Yasuda Mutual Life, Japan's seventh-largest life insurer in terms of assets, has been a PaineWebber shareholder since 1987. It currently owns 8.1 percent of the company's stock.
Financial intermediaries in Japan have another choice of investment products for retail and institutional clients. FIRST UNION CORP., which ranks as the sixth-biggest U.S. bank and the eighth-largest brokerage, is opening a sales and service operation in Tokyo to market Evergreen mutual funds and other investment products. This initiative is a collaboration between the Charlotte, North Carolina bank's Capital Management Group and its International Division. Through its 1998 acquisition of CORESTATES CORP., First Union gained an office in Japan that has been in operation since 1975.
PRUDENTIAL-MITSUI TRUST INVESTMENT CO., LTD., which opened for business at the beginning of October (see Japan-U.S. Business Report No. 347, August 1998, p. 14), is offering three mutual fund products designed for Japanese retail customers. They are available through MITSUI TRUST & BANKING CO., LTD.'s branches. In 1999, the joint venture intends to introduce at least three more mutual funds that will be packaged with financial planning advice and investment education from equal owner PRUDENTIAL INSURANCE CO. OF AMERICA.
The prospect that a 401(k)-type defined contribution pension system will be put in place in Japan in FY 2000 or even in FY 1999 is attracting considerable interest from American specialists in this field. Already, for instance, the international arm of CIGNA CORP. has announced plans to form an equally owned company with YASUDA FIRE & MARINE INSURANCE CO., LTD. to market pension and investment products. The joint venture, which is expected to be formed in April and to launch sales in September, will be able to tap the extensive distribution network of Yasuda Fire & Marine, Japan's number-two nonlife insurer, and CIGNA's expertise in developing defined contribution pension plans. Investors also will have access to existing mutual funds managed by affiliates of CIGNA and Yasuda Fire & Marine. The two companies have worked together for some 25 years. In Japan, they own INA HIMAWARI LIFE INSURANCE CO., which offers a range of life, endowment and hospitalization products. CIGNA also sells a variety of property-casualty insurance in Japan through CIGNA ACCIDENT & FIRE INSURANCE CO., LTD. .....Meanwhile, FIDELITY INVESTMENTS JAPAN LTD. will set up a unit to map out its approach to the coming defined contribution pension system. The company's parent is the top provider of 401(k) retirement savings plans in the United States. Fidelity Japan currently manages nearly $2.5 billion in defined benefit pension plan assets for more than 40 local firms.
Asset manager FISCHER FRANCIS TREES & WATTS INC., which specializes in fixed-income portfolios for institutional clients, reportedly is in talks with NIKKO SECURITIES INVESTMENT TRUST & MANAGEMENT CO., LTD., a NIKKO SECURITIES CO., LTD. subsidiary, to advise it on international investments for new bond mutual funds. New York City-based FFTW set up a Japanese affiliate in 1996.
In order to offer corporate clients a broader range of financial instruments, including Japanese government bonds swaps and options, FIRST CHICAGO TOKIO MARINE FINANCIAL PRODUCTS LTD. has applied to the Ministry of Finance to convert to a brokerage house. Established in November 1997, the equally owned venture between big bank holding company FIRST CHICAGO NBD CORP. and TOKIO MARINE & FIRE INSURANCE CO., LTD., Japan's top nonlife insurer, now is licensed as a dealer in derivatives.
Standard & Poor's Financial Information Services, a division of MCGRAW-HILL COS., INC., is in talks with the Tokyo Stock Exchange to explore opportunities for indexing in Japan and elsewhere in Asia. The objective, says S&P, is to provide liquid and investable equity indices as well as index funds, futures, options and other index-linked products that would give the international investment community greater exposure to corporate Japan. Among its other services, S&P calculates and maintains the S&P 500 for the U.S. stock market.
More American firms are willing to bet that real estate bought at a deep discount will appreciate in value over time. Among the latest is the commercial mortgage unit of GENERAL MOTORS ACCEPTANCE CORP., the second-largest nonbank financial concern in the United States. GMAC COMMERCIAL MORTGAGE CORP., which set up a Tokyo operation in late 1997, has purchased to date in cooperation with other foreign investors property- backed nonperforming loans with a book value of more than $3.4 billion. Now, GMACCM plans to invest at least $300 million and perhaps substantially more in real estate-related bad loans. It also expects to become a third-party servicer, which collects the money owned on real estate-secured loans, as well as to lend to investors in Japan's real estate market.
Through its year-old joint venture, electronics industry leasing equipment giant COMDISCO, INC. will start a leaseback program for semiconductor production equipment. Tokyo-headquartered COMITO EQUIPMENT MANAGEMENT SERVICES, in which ITOCHU CORP. has a 40 percent stake, hopes to sign leaseback contracts worth $854.7 million by the end of 2000. By selling equipment to Comito and then leasing it back, chip manufacturers reduce depreciation costs.
An exchange rate of ¥117=$1.00 was used in this report. aaaaaa