2018 was another year of growth for Nikko AM with ETF assets under management increasing from USD57.8 billion up to USD61.8 billion year on year, with ETF inflows of over USD10 billion.
During the year the firm listed a Singapore domiciled Investment Grade Bond ETF in addition to its Japan domiciled Listed Index Fund US Equity (S&P500) Currency Hedge ETF.
Of this launch, Koei Imai (pictured), Head of the ETF Centre at Nikko Asset Management, says: “Many investors in Japan are interested in investing in US equities but don’t want to take the currency risk.”
Nikko AM’s ETF Specialist Pritpal Lotay also reports new launches in Europe. “In the UK we are expanding the product range that we can sell and market here and so we have registered our Singapore domiciled ABF ETF for marketing in the UK and Switzerland. The ETF invests in Singaporean government securities, which we believe will be a diversifier for client portfolios as they move away from traditional fixed income.”
Imai reports that 2019 will be a year of new launches for Nikko AM. “The one challenge for all investors now is that they want yield, so we continue to see a strong interest in our J-REIT ETF. Institutional investors also remain interested in our TOPIX ETF.”
Lotay comments that from a European perspective, investor interest in ESG and its integration into portfolios has picked up. “Since investors are starting to become more mindful of ESG, this has driven more interest in our JPX-Nikkei 400 ETF. The JPX-Nikkei 400 Index has a weighting for stocks that exhibit good corporate governance.”
Imai believes that Nikko AM’s strength in the ETF industry since the awards started – stems from two key words: quality and service.
“There are lots of ETF products but our clients still really appreciate the high quality of our products that have low tracking errors compared to our competitors and correlate very closely with the indices. Our fees are low as well.”
Lotay says that the firm is also know for its track record and size. “In terms of track record, we have experience in managing index investments dating back to 1986 and in terms of size, our largest ETF, the TOPIX, has grown to over USD31 billion.”
Nikko AM is the second largest ETF provider in Asia and in tenth position globally.
Imai says: “The market situation is getting tougher with new ETF players coming in with low fees and a similar product range.”
Lotay adds: “Our products remain competitively priced in today’s market. When compared to US and European equivalents, some of our products have a TER which is approximately 30 percent cheaper.
Imai believes that the Abenomics story is gaining trust within Japan.
He says: “People were initially sceptical but they do have trust in the economic policies that the Abe administration is employing. There will be a VAT rate change from 8 to 10 per cent this year but the government is implementing measures to alleviate the impact and there are lots of positive events lined up for Japan which should support the economy. It’s an interesting area right now.”
While Nikko AM’s ETF business predominantly serves an institutional investor base, recently they have seen increasing interest in ETFs from Japanese retail investors.
Imai, reports that a recent investor relations event at the Tokyo Stock Exchange had over 20,000 visitors, with Nikko AM’s booth handing out all of its 1,200 brochures. Retail investors want to better understand the mechanics of ETFs and how they compare to traditional mutual funds.