Foreign bankers have a good shot at reeling in Japan’s new generation of wealthy by offering investment advice and innovative services such as hedge funds, said Hiroyuki Miyamoto, senior consultant at Nomura Research Institute Ltd.

The new generation, defined as those under 60, is more willing than its older counterparts to use foreign financial institutions.

“They (the younger wealthy) are less reluctant to pay fees to receive advice and second opinions and to receive other kinds of services offered by foreign agencies,” Miyamoto said.

Already 20 percent of the new generation use foreign financial institutions as their main financial helpers, compared with 33 percent who use domestic mega-banks, according to Nomura Research.

Daiwa Securities Group Inc., Japan’s second-biggest brokerage, is betting on a new Singapore office to win business from wealthy Asian clients keen to invest in Japan, Koshiro Taniguchi, Daiwa’s head of private banking said.

Daiwa’s outbound strategy is three-fold: win Asian clients interested in Japanese investments, develop Asian products for its Japanese clients, and win business from Japanese seeking lower tax jurisdictions abroad.

“In the future we expect some older Japanese to move abroad to minimise their taxes,” Taniguchi said. “We’re working with lawyers and accountants to figure out what kind of services we can provide.”

Once Japan’s banks get the green light to sell separately managed accounts to the country’s wealthy, they will go all out to grab the business from brokerages, said Toshihiro Miyake, a partner at the Japanese arm of consulting firm Accenture Ltd.

“If the restriction on banks is lifted, naturally they will compete with brokerages just like they did in investment trusts,” Miyake said.

“The business environment is not the same as in Europe and the U.S.,” he said. “But it is moving in that direction.”
 

Compared to their Western counterparts, managers of pension funds in Asia have been less likely to invest in alternative strategies such as hedge funds.

Carol Hall and Philip Millward, partners at the Hong Kong office of Walkers, note that this could change as Asia’s hedge fund industry grows.

The hedge fund industry in Asia is still in its infancy, said Philip Millward, partner at the Hong Kong office of law firm Walkers.

Therefore, Asia is likely to draw more players in the industry, both institutional investors and start-ups, he said.

The result?

“We’ll see increased competition amongst the managers for target investments.”

Here, Millward talks about how some hedge funds are beginning to adopt private-equity strategies.

Rapid growth in Asia has created more than just opportunity for foreign investors, said Wm. David Seymour of KPMG. It has boosted the numbers of high-net-worth individuals in the region.

                                                                                                                                                                        One of the challenges facing private banks in Asia — especially in developing markets where clients may be “affluent” rather than “very wealthy” — is how to strike a balance between the number of clients serviced and the number of services offered, said Wm. David Seymour of KPMG.

Japanese assets offer the best bet for hedge funds over the next couple of years, as a lack of competition creates trading opportunities, the head of a hedge fund advisory firm said at the Reuters Wealth Management Summit in Tokyo.

“I think the opportunity set in Japan is the best in the world for equities-based hedge funds,” Ed Rogers, chief executive of Rogers Investment Advisors, said.

Rogers expects his upcoming fund, which puts together hedge funds for wealthy individuals and pension funds for a fee, to rack up net annualised returns to investors of 12 percent to 17 percent.