Nomura Asset Management is consolidating its Japan-focused equity funds, effectively merging its underperforming Nomura Japan Equity Strategy Fund with the Nomura Japan Open. This move follows a prolonged period of disappointing returns from the Strategy Fund, which was once a standout due to its size.
Launched in February 2020, the Nomura Japan Equity Strategy Fund initially surged to ¥1.167 trillion ($7.8 billion) in net assets, largely driven by investments in the tech sector during the IT bubble. However, the fund’s performance has been lacklustre in the subsequent years, failing to outperform Japan’s benchmark Topix index in four out of the past five years.
As of the latest data, the fund’s net assets have plummeted to just ¥55.7 billion, a dramatic decline of over 95% from its peak. Investors have also faced a relatively high expense ratio of 2.08%, significantly above the industry average of 1.65%. These factors prompted Nomura to initiate discussions with stakeholders about streamlining the fund and aligning its investment strategy with the more successful Nomura Japan Open.
The decision to merge these funds comes amid broader pressure within Japan’s asset management industry to improve returns and reduce costs. With Japan’s aging population, policymakers are keen to encourage greater household savings in the stock market to bolster retirement funds. The shift of individual investors’ funds overseas in search of better returns has put added pressure on local fund managers to enhance both performance and cost-efficiency.
Nomura’s restructuring is a response to these challenges, aiming to offer a more competitive product in a market where investors are increasingly cautious and demanding better value. This merger reflects a strategic move to address both underperformance and high costs, making it easier for Nomura to compete for the attention of Japan’s savers and investors.
