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WisdomTree embarks on selling the rest of the world to Japan

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Jesper Koll is the newly appointed chief executive officer of WisdomTree’s new Japan office, opening soon in Tokyo, and the firm’s first office in Asia.

WisdomTree is no stranger to Japan, as the largest provider of ETFs based on Japanese strategies with 11 funds including their flagship fund, the DXJ, the Japan hedged equity fund, with some USD17 billion under management.
 
Of the firm’s USD58 billion in total assets under management, about one third is in Japanese strategies, Koll explains. The first office in Asia marks the firm’s belief in the enormous potential in Japan.
 
“Japan stands at the beginning of a multi-year positive cycle and the key issue is that the change from deflation to inflation is actually happening,” Koll says. “The key issue is that wages and incomes have stagnated for 20 years – the national income is today where it was in 1994 and no income growth means no savings’ growth so no demand for assets.”
 
However, he says that what is happening is that the drag of incomes from the baby boom generation retiring is coming to an end and the younger generation is in great demand and the labour market very tight. “For the first time in 22 years we are seeing full time employment growth and increased wealth and ability and willingness to take risks,” he says.
 
For Koll, Abenomics has been more of a symptom of the malaise that has held the country in thrall for the last 20 years. “You do have this generational change and now you have a leader in Prime Minister Abe who seizes the opportunity and everything they do is pro-business.”
 
Koll argues that Japan is the most stable and pro-business government in the industrialised world, particularly as that leader of the industrialised world, the US, is a bit busy with the first innings of a presidential election.
 
The WisdomTree approach in Japan is two pronged: selling Japan to the rest of the world, something they appear to have already done fairly thoroughly, and then selling the rest of the world to Japan.
 
“Globalisation of the Japanese pension, insurance and retail industries is really at the very beginning,” Koll says. “Selling Japan to the rest of the world is an ongoing venture for us but selling the rest of the world to the Japanese institutions is the point of opening an office.”
 
The lack of depth in the Japanese market has recently beached a number of ETF providers offering leveraged products.
 
“The specific Japanese problem is the depth and breadth which is not very developed,” Koll says. “There is room for leveraged ETFs but the market is about USD130 billion and about half of that is the Bank of Japan, who buys and holds, and the remaining half is leveraged products, so concentration risk is the problem and you get these distortions.”
 
However, Koll is certain the problem will not happen to WisdomTree.
 
 “It won’t happen to us. The reason is simple – there is no leverage in our products and in terms of our client base, it’s very diversified across wealth funds, hedge funds and retail funds,” he says.
 
 

 

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