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Nomura's CEO is considering global acquisitions to expand the asset management business of Japan's largest securities firm and investment bank.
In an interview with the Financial Times, Kentaro Okuda said the bank is making a strategic shift towards asset management and adopting a consulting “mindset.”
As part of his push into private equity and private credit markets, Okuda wants to expand Nomura's global asset management capabilities to prepare for a generational shift in Japanese investment habits.
“One of our M&A targets is overseas asset management companies that have strengths in alternative assets,” Okuda said at the bank's headquarters in Tokyo. “The second target is also overseas advisory-type businesses.”
Since becoming Nomura's chief executive in 2020, Okuda has said his mission has been to cut costs and reduce reliance on volatile revenue streams from trading and investment banking.
But his early tenure was spent dealing with the aftermath of Bill Hwang's Archegos Capital's collapse in 2021. Nomura reported a $2.9 billion loss in the collapse.
The bank and securities firm are preparing to take advantage of an expected shift in Japanese household assets from cash and deposits into higher-yielding investments.
Currently, the percentage of assets allocated by Japanese investors to private equity and private debt is close to zero, so Okuda expects to see increased investment from both individual and institutional investors in these alternative assets.
According to the Bank of Japan, Japanese households currently hold about half of their total financial assets of 2,200 trillion yen ($13 trillion) in cash and deposits.
But banks and analysts expect the normalization of central bank monetary policy and the return of persistent inflation to make people rethink their savings strategies, while a wave of inheritances expected from the baby boomer generation born after World War II is also expected to shake up investment habits.
Major global private equity firms such as Blackstone and Carlyle are stepping up their campaigns to attract Japanese retail investors to their funds, while major financial institutions such as Japan's Government Pension Investment Fund (GPIF) are preparing to allocate much of their 226 trillion yen asset portfolios to alternative investments.
In May, analysts at Morgan Stanley MUFG published a report predicting “significant changes” to Japan's asset management industry, creating billions of dollars in revenue opportunities for Japanese banks and rivals vying for wealthy and “upper-wealth” clients.
Nomura has renamed its once famously aggressive retail brokerage business as “wealth management” and stressed its shift to offering higher-value services, including investment advice.
Okuda said banks want to change the aggressive sales tactics of brokers. “The mindset is changing from broker to consultant,” he said.
He added that Nomura will break from its long tradition of going it alone to expand its reach to wealthy clients and build on a series of partnerships with regional banks it formed in 2019.
Okuda acknowledged that Nomura will face increasing competition in asset management from major Japanese banks such as MUFG, SMBC Group and Mizuho, as well as overseas groups such as UBS.
“It's better if there are no competitors in this market,” Okuda said, but added that “competitors will naturally enter the market, not only from within Japan but also from overseas.” [Japanese] The megabanks and so on. I think they're already here and competing.”
