(Bloomberg News) Kagawa Asset Management Co., run by a former Goldman Sachs Group Inc. banker, is aiming to boost its private banking assets by 67 percent as Japan's rich seek to preserve their $4.6 trillion wealth amid the global market rout.
Kagawa Asset is seeking to boost assets under advice by 10 billion yen ($130 million) in 12 months, said Yuichi Kagawa, the founder of the Tokyo-based firm. Kagawa has grown assets under advisory to about 15 billion yen since starting in April 2009 and currently has about a dozen clients who are business owners of both publicly traded and private Japanese companies, he said.
Lower costs and a cultural preference for local expertise may help Kagawa win business in the nation with the world's highest number of millionaires after the U.S. Demand from high- net-worth individuals is rising as the yen surged to a post World War II high against the dollar and global markets head for the first annual loss since 2008 amid Europe's debt crisis.
"There aren't that many players yet in Japan's private banking business who can provide the kind of services that the Japanese rich are looking for," Kagawa, 43, who worked at Goldman Sachs's private-banking business for a decade, said in an interview in Tokyo on Nov. 15. "This is the time for us to be building up."
Japan's high-net-worth wealth pool of $4.63 trillion increased 6.97 percent in 2010 from the previous financial year, according to Scorpio Partnership, an adviser to wealth management institutions and family offices. The number of millionaire households increased by 12.2 percent in 2010 to about 12.5 million, led by the U.S., followed by Japan, the Global Wealth Report by Boston Consulting Group in May shows.
Other so-called boutique Japanese firms are aiming to take up market share in the wealth management business in Japan, which is currently dominated by the country's biggest banks.
Star Mica Asset Management Co., also run by a former banker at Goldman Sachs, is aiming to use its expertise in real estate investment advice to more than double its assets under advisory to 20 billion yen in two years. Book Field Capital Co., co- headed by a lawyer and a Goldman Sachs banker, started a hedge fund this year to raise money from wealthy individuals that are seeking to diversify their investments.
"Japan remains a complex riddle for international private banks," said Sebastian Dovey, managing partner at Scorpio Partnership in London. "Many have attempted to grow domestic businesses but have failed. A large part of the reason for this is that Japanese wealthy investors are very much in favor of utilizing local operators for their domestic requirements."
Japan's top three banks manage about half of the wealth in the nation's three-biggest regions of Tokyo, Osaka and Aichi prefectures, according to Hiroyuki Miyamoto, the general manager of Nomura Research Institute Ltd.'s financial business consulting department in Tokyo. Local brokerages account for 20 percent, while foreign brokerages, trust banks and regional banks make up more than 20 percent.
"The boutique-type firms don't have a big market share yet, but those with some expertise in the type of investments they provide are becoming more popular," Miyamoto said.