The U.S. mutual fund market could hardly look less inviting to an asset management firm eyeing expansion opportunities. Investors withdrew $234 billion more from equity mutual funds than they deposited into them in 2008, according to the Investment Company Institute in Washington, as the Standard & Poor’s 500 index took a 38.5 percent nosedive. Still, Nomura Asset Management Co., the money management arm of Japanese brokerage Nomura Holdings, which picked up the Asia, Europe and Middle East investment banking and equities operations of the bankrupt Lehman Brothers Holdings in late September, is making its move. “A global asset management firm cannot do without a presence in the world’s largest mutual fund market,” says Shigeru Shinohara, president and CEO of New York–based Nomura Asset Management USA. “We see a long-term opportunity in the crisis.”
In January, NAM USA launched nine retail funds in the U.S. that focus on global equities — and Shinohara is doing it on the cheap. Five of the new funds clone the strategies that Namco uses for the $200 billion in mainly institutional money it manages from its offices in London, Hong Kong, Singapore and Tokyo. Three others replicate funds managed by two subadvisers. The remaining one is the $179 million-in-assets Japan Fund, which was managed by Fidelity Investments in Boston until NAM USA won the contract in June 2008. Shinohara says the fund board cited Fidelity’s volatile performance when it made the decision to switch. Nomura seeded the eight other funds with $5 million each, bringing its total U.S. assets under management to $219 million.
NAM USA will use the Japan Fund to provide the three-year track record needed for funds to get noticed in the U.S. One industry expert says that even though Shinohara is a new player in a crowded market, his plan could work. “If the anticipated market cycles cooperate, returns are competitive, strong distribution agreements can be reached and Nomura is committed to marketing, success could be attained despite being a new player,” says Jeffrey Keil, principal of Keil Fiduciary Strategies, a Littleton, Colorado, firm that advises independent mutual fund boards.
First, NAM USA needs to get performance right. The institutional version of the repackaged U.S. Nomura Partners Global Alpha Equity Fund lost 49.98 percent for 2008 — worse than 92 percent of competing funds, according to eVestment Alliance, a Marietta, Georgia, firm that tracks manager performance. The institutional version of the Nomura Partners International 130/30 Equity Fund was down 47.07 percent for 2008, below 99 percent of competing funds. Shinohara says both funds’ subadvisers had “excellent” long-term track records through 2007, when markets took a turn for the worse.
