Generational shift sees Japanese investors flock to real assets
Since the Japanese ‘bubble economy’ burst at the end of the 1980s, it has seen sub-par growth, recessions, deflation and a secular bear market in shares and property. These events have had a lasting impact on the funds management industry and on the long-term asset allocation strategies of Japanese institutional investors.
On the one hand, it has promoted more cautious investment strategies and a greater focus on portfolio risk management. On the other, the prolonged low-yield environment has heightened the need for return-enhancing strategies and increased the appetite for alternative assets.
Today, Japan’s asset management industry is on a new growth phase. Its AUM (approaching 500 trillion yen) and asset management revenues both surpassed their 2007 peaks in 2016 and are likely to keep growing. Japanese institutional investors typically have longer term liabilities and over the last decade have been looking for new sources of long-term, inflation-protected returns. They represent a potentially major source of long-term financing for real assets.