Aberdeen Asset Management has targeted Japan in a bid to boost returns, sealing a tie-up with THE financial services firm Mitsubishi UFJ Financial Group, which has bought an almost 10 per cent stake in the UK group.
The firms announced a "strategic business and capital alliance" yesterday as Mitsubishi UFJ's Trust & Banking arm took a 9.9 per cent stake, and added it could raise its holding to 19.9 per cent when regulators allow.
The UK firm's finance chief described the move as Aberdeen's "first major push into Japan". Under the agreement, Mitsubishi will gain exclusive rights to market Aberdeen's products to its institutional clients – especially pension funds – in Japan.
Bill Rattray, finance director of Aberdeen, said: "This is an excellent opportunity for us. Japan is a really difficult market for any Western firm to break on its own."
The group's shares have slumped about 30 per cent during the credit crunch, but the move was lauded by analysts and the shares rose as much as 8 per cent. Rae Maile, analyst at Cazenove, said: "Flow expectations across the sector will have deteriorated because of market weakness, but through this relationship Aberdeen has the scope to materially outperform the sector in flow terms, a major driver of sentiment."
Japan has the second largest pension market in the world, with assets estimated by the consultancy Watson Wyatt to be worth $3.08 trillion, and the market is increasingly looking to invest internationally.
Aberdeen's management said they didn't know how much the partnership would be worth to the company – "We'll have to wait and see," said Mr Rattray – but added that should just 1 per cent of pension fund assets be allocated internationally, they would be competing for a pot of $30bn. "They have an ageing population and they want to get the most out of their pension investments," Mr Rattray said.
The Cazenove analyst said the potential financial benefit for Aberdeen was difficult to quantify, "but the scale of investment by Mitsubishi clearly shows intent".
Mitsubishi will not be able to raise its stake past 20 per cent for at least 18 months under the terms of the deal, unless the business alliance collapses or a rival approach is made for Aberdeen.
Aberdeen, which was set up in 1983 and is headed by Martin Gilbert, employs just under 2,000. Its Asian presence is currently dominated by its operation in Singapore. It has a small office in Tokyo, as just 2 per cent of its assets are managed for Japanese clients.
Mitsubishi UFJ is the largest banking group in Japan, with a market capitalisation of $92bn. Its Trust & Banking arm also has assets worth $245bn under management.Reuse content