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Five Questions: Nikko Asset Management CEO Charles Beazley

Japan is bouncing back, according to Nikko Asset Management's new CEO, Charles Beazley. He recently spoke to Institutional Investor Staff  Writer Neil Sen.

Charles Beazley became CEO and chairman of Tokyo-based Nikko Asset Management on April 1, the second non-Japanese man to lead the firm after his predecessor, the American Timothy McCarthy. An Asia-focused firm managing $154 billion in assets, Nikko canceled a planned IPO in December but is still keen to push ahead with expansion into Indonesia, South Korea and Taiwan under its new, British boss. The firm has been steadily building up a presence outside Japan; most significantly, it’s been active in China since 2007 through a joint venture with Rongtong Fund Management. Beazley, 52, tells Institutional Investor Staff  Writer Neil Sen that Japan is bouncing back.

How does Europe look from where you’re sitting?

People here in Asia are very disturbed by events in Europe. They had previously thought Europe was a solid, safe place in which to invest, a continent of highly competent economic and political management, and that the EU was an indissoluble union. All those ideas turned out to be illusions, and Asian investors are, at best, inclined to sit out the crisis and wait. As for European banks, it’s horrific to listen to them. I have heard them giving talks to Asian institutional investors which are simply depressing.

Are you an “orientalist” now?

I am in the sense that I lament the rise of “globalist” firms that try to flatten the earth and ignore the distinctions among countries. In the old days there were “orientalist” firms like Flemings that understood their local markets very well. Because much of Asia ceased to be classed as an emerging market a few years ago, there was even more impetus for global organizations to move in. Yet, Asia is a region of eight time zones and 3.6 billion people, and the vast majority of assets in Asia are local and retail. You need to have local expertise. You shouldn’t have to speak English as an Asian asset manager.

Does it feel odd being the non-Japanese head of a Japanese firm?

Not at all. For one thing, Nikko is an Asian firm with 40 percent of its employees outside Japan and 65 percent of its assets non-yen-denominated. We’re something of a hybrid. And my family is actually well acquainted with Japan: My maternal grandfather was the British naval attaché here in the 1930s, and my mother lived here for a while. Given the balance of my career working with international corporations in many countries around the world, it’s a pleasure to be working within this great culture.

How different are Japanese investors?

The archetypal Japanese investor, “Mrs. Watanabe” [a common term for housewives who deal in foreign exchange], is in her 60s, older than the average Western investor, so income is very important. Interest rates, after all, are very low in Japan, and bond yields in other parts of Asia are attractive. Generally, she is very conservative and more concerned than Westerners about defaults and bankruptcies. She is, however, quite willing to accept currency risk, in contrast to Westerners.

Is the Japanese economy recovering after the disasters of last year?

There’s a great deal of reconstruction work going on, plenty of capital expenditure by corporations, so production has been bouncing back and should continue to do so. We’re expecting things to normalize in 2012 and forecasting economic growth of 2.2 percent. The odd thing is that although the Japanese don’t really recognize the problem of inflation, rising fuel prices do present quite significant inflationary risks.

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