Presented by Syntax Advisors.
Margareta Hricova: Welcome to ETF TV – your insight into the world of exchange traded funds, issuers and investments. I am Margareta Hricova and joining me today is Stefanie Drews, resident of Nikko Asset Management Group and Deborah Fuhr.
Stefanie Drews: Thank you for having me.
Deborah Fuhr: Thank you.
So, Stefanie, it’s great to have you join us. It’s unusual for a woman and a ‘gaijin’ to be the president of a company in Japan. Can you tell us the backstory of how you rose to that position?
Stefanie Drews: I started almost eight years ago by running the sales support side, which was increased to the product side, which was the real heartbeat of the organization. Marketing, ETF sustainability and eventually international sales as well. And so that really gave me an opportunity firstly to really get to know the company from the inside, and secondly, an ability to prove myself. It is unusual to have a foreign female and I’m really grateful the board and other senior managers were able to give me that opportunity.
Margareta Hricova: Nikko Asset Management just listed some fixed income ETFs in Japan. What types of investors use ETFs in Japan and how do they use them?
Stefanie Drews: So yes, we listed two France government bond ETFs; the first of their type to be listed on the Tokyo Stock Exchange. We listed those in response to a direct request from a Japanese financial institution. Most of the clients who buy ETFs are actually financial institutions. On the retail side, it’s a much more nascent industry, obviously with huge potential, but currently it is still quite difficult to buy ETFs.
Deborah Fuhr: In 2017, Nikko Asset Management acquired a 15% stake in Ark Invest. How do you work with Cathie Wood and her team?
Stefanie Drews: We have a very large in-house investment capability at 230 managers, but we do complement with third-party providers as well as joint ventures, and Ark is a joint venture. In essence, what we do is import the strategies, various different strategies that Ark Invest is able to provide into different vehicles that we then provide for our clients.
In our case, we have six Japan domestic ones that represent anything from metaverse, genome, fintech, mobility as a service, disruptive transformation, and those are provided as Japan mutual funds. And then those two strategies, disruptive innovation, which is our flagship, as well as positive change, which we actually offer as a UCITS with Japan being catered for through feeder funds, so really unusual, because that really links Japan sales and international sales through one vehicle.
Margareta Hricova: Nikko Asset Management offers both ETFs and mutual funds. When and why do investors prefer ETFs and when and why do they prefer mutual funds?
Stefanie Drews: Currently, ETFs are only passive, so if you’re looking for active management, you will go for an unlisted investment trust, which is what we would call it. Of course, the investment trusts will only have end of day NAV as opposed to intra-day pricing, and it’s also quite difficult to buy an ETF except through a securities firm. But an investment trust can be bought very, very easily through banks, insurance companies, of course, the securities firms. And so it’s a matter of access, the kind of pricing that you want and whether you want passive or active that will determine which of the two that you will choose.
Margareta Hricova: On April 1st, you announced a new ten year plan for Nikko Asset Management, where you plan to grow the assets managed for investors outside of Japan by sevenfold. How do you expect to achieve this growth?
Stefanie Drews: That target is driven by an overall growth target of doubling our AUM in the next ten years. Japan is clearly still the broader part of our business, but of course the market is growing at a slower pace. And so that is why the international assets have to grow significantly more through a combination of organic and inorganic growth.
Organic by using our existing footprint that we have globally, which is actually quite deep and leveraging on that, whether it is in North Asia by complementing our Rongtong venture with a wholly foreign owned entity, making further inroads into Korea, Southeast Asia, where we have a phenomenal joint venture with Affin Hwang in Malaysia. In Europe, we’re looking at third-party marketing agreements to help us extend our footprint, and we’re also hiring our own salespeople.
But clearly we’re going to have to complement that with inorganic growth to get to that target. So we are looking for potential distribution partners in the areas I just mentioned, so continental Europe, Southeast Asia, the US, as well as complementing our investment capabilities with some inorganic partners in the space of ESG, private assets and ETFs.
Deborah Fuhr: That’s great. Thank you for joining us today.
Stefanie Drews: Thank you.
Margareta Hricova: Debbie, can you share with us some of the other news from the ETF industry?
Deborah Fuhr: Last week there were 19 new listings and 24 new cross-listings. A number of the products were focused on ESG and others were thematics. We saw Vanguard bring two ESG products to market. iShares and BlackRock had some products that came to market also, and of course, a number of other issuers.
When we look at the year to date trends, we’ve had 916 new listings and we’ve had 1136 new cross-listings. Focusing on Japan since that’s the market we were talking about earlier, there’s 260 products, there’s 293 listings. Assets are currently 490 billion. There’s 18 providers and they’re listed on three exchanges at the end of July, based on our research. That accounts for about 5% of the overall assets when you think about the ETF industry.
The Bank of Japan has been buying Equity ETFs since 2012, and they currently account for 63% of the ownership of assets of ETFs in Japan. And we’ve also seen that the growth in the ETF industry has been expanding in terms of the number of users using ETFs in Japan, as you heard from Stefanie.
Margareta Hricova: Thanks so much for that update, Debbie. And thanks again to Stephanie for joining us today and to our sponsors, Syntax Advisors, and of course, to all of you for watching.
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