Anglo-American fund giant Amves-cap Plc said yesterday it was gearing up to tap the potentially huge Japanese retirement savings market, but that risk-shy investors and a dearth of tax incentives could hinder progress.
The company's focus on the Japanese market follows a June 22 law introducing a version of the US 401(k) retirement savings plan. The new legislation aims to revamp a pension system under increasing strain from Japan's rapidly greying society.
"I think one would have to say this is a 10-year haul here. This is not something that is going to immediately take off," Michael Benson, chief executive of Invesco Global, the Amvescap division responsible for operations in 23 countries outside North America, said.
"The tax breaks aren't there. Where they are, they're not sufficient."
Under the 401(k) plan, contributions are defined and returns on pensions will depend on individuals' investment decisions.
Participating financial institutions must provide more than three types of financial instruments to choose from.
Benson echoed analysts' predictions that the new system could be hampered by a law that sets tax-deductible limits on defined contribution premiums at ?216,000 (US$1,737) for employees in corporate pension plans. That is about 10 percent of the average amount in many US 401(K) plans.
To expand its presence here, Benson said Invesco Global would concentrate on creating products with a fixed-income bias, tailored for a population that holds a big chunk of an estimated ?1,390 trillion in bank deposits and postal savings accounts, where they earn rock-bottom rates.
"What we recognize is that the Japanese investor is basically risk-averse. They prefer a fixed-income type product," he said, adding that he hoped to introduce a number of such products within the next few months.
In terms of investment trusts, Invesco Asset Management (Japan) ranks 25th in Japan with ?104.2 billion under management. Benson said they were not satisfied with that position.
"Clearly, being number 25 in the (trust management) market in Japan is not where we would normally want to be," he said, adding that he aimed to be 5th within three to five years.
The world's largest publicly traded fund manager, Amvescap had US$370.3 billion in funds under management as of March 2001, while Invesco Global held US$64.6 billion.
Benson said he saw growth in Japan as part of a larger plan for the Pacific region, with Invesco Global looking to build on its success in Hong Kong and Australia.
Ultimately, Benson said he will put his faith in luring reluctant Japanese investors back to share markets.
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