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Nikko Asset Management – Best Asia Pacific Equity ETF Manager

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These are exciting times for Nikko Asset Management. As one of Japan’s largest ETF providers, the fact that Japanese equities over the last 12 months have rediscovered their lustre puts Nikko AM in a strong position to deliver not only high quality Japan ETFs, but cost-effective ones as well.

“By the end of 2013 we had more than USD17bn across 23 ETFs. Within that range, 14 are Japan equity ETFs of which the TOPIX Fund (USD7.5bn) and Nikkei 225 Fund (USD9bn) are our flagships, complemented by specialist products such as Mid and Small Cap Equities and J-REITS,” comments Koei Imai (pictured), Head of ETF Centre at Nikko AM.
 
Over the last nine months, Nikko AM has embarked on an active marketing campaign across Europe to “bring Asia to western institutional investors”, says Geoffrey Post, Head of International Product Development. Historically, Nikko AM’s ETF marketing has focused on raising institutional assets in Japan, which still dominate its ETF market, but with Abenomics helping to reinvigorate Japanese equity markets the time is right to raise interest among European institutions who need expert providers.
 
“The amount of passive AuM we run, including ETFs, is approximately USD30bn. Our large passive investment team in Japan focuses on investing in the most efficient way that minimises tracking error. We bring local market expertise to deliver high quality, low cost products. Those are all important considerations when speaking to investors,” says Imai.
 
“Institutions can buy a European-listed Japan ETF but what they find is that many funds do not have significant size and liquidity,” he adds.
 
Clearly, demand for exposure to Japanese market beta has been on the rise. Nikko AM’s investment team seeks to fully replicate indices with physical stocks, thus keeping the tracking error to a minimum.
 
“Couple that with the fact that our fees are very low and our funds are large, offering significant on-exchange liquidity, it goes some way to explaining why investors favour our ETFs. The European institutions we are marketing to, including asset managers, pension funds and banks, understand the importance of a low tracking error and low fees, as well as the advantages of investing during Japan market hours,” comments Post.
 
Product evolution is an important area of development for Nikko AM. In September Nikko AM launched the TOPIX Ex-Financials ETF, while in January the JPX-Nikkei Index 400 ETF listed. This is a new index co-developed by Japan Exchange Group, Tokyo Stock Exchange and Nikkei Inc that uses qualitative and quantitative criteria including return on equity (ROE) and the degree of governance within individual companies to build a portfolio of high quality companies.
 
Investors based in Japan observe how rapidly market dynamics have shifted, with institutions facing up to the implications of inflation and the possibility of real economic growth. Meanwhile there are positive signs of changing retail investor behaviour following January’s launch of the NISA tax incentives, aimed at encouraging private investment in shares and funds.
 
All of which explains why Nikko Asset Management is starting to see “a very healthy level of interest” across a broad range of investors.
 
On winning this year’s award, Alex Shaw, Head of EMEA Sales and Marketing comments: “I’d like to thank investors for their ongoing support, for again expressing such a high level of confidence in Nikko AM’s ETFs”.

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