Goldman CIO service suddenly catches on in Japan after 10 years
A second pension was signed up in early 2025. Now about 10 more potential customers are in the pipeline, according to Kenro Tsutsumi, head of Goldman Sachs Asset Management Japan.
The sudden influx of business reflects an increased willingness of Japanese institutional investors to hire third parties to help oversee their trillions of US dollars in assets. More global financial firms are seeking to offer the service, known as an outsourced chief investment officer, in a bid to generate stable fee income.
'This business is a top priority for us,' Tsutsumi said in an interview in Tokyo. 'It's a big opportunity.'
The return of inflation after two decades has added pressure on Japan's pensions and insurance companies to seek higher returns. The government has also been urging asset owners to better serve their beneficiaries, including by tapping the expertise of OCIOs.
Financial firms, for their part, are increasingly viewing asset management as a steady source of revenue growth in an unpredictable business environment. Globally, the OCIO industry's assets are expected to grow about 7.9 per cent a year on average to 2028, consulting firm Cerulli Associates said in a November report.
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In Japan, Goldman is going up against the likes of BlackRock and Marsh & McLennan Cos' Mercer, which have also signed up large clients recently.
Goldman can compete in the OCIO space through an ability to provide its own investment products across traditional and private assets, said Tsutsumi, a veteran of more than two decades at the US bank who took the top job at the Japan asset management division at the start of 2024. He declined to give the names of its two clients in Japan, citing confidentiality.
BlackRock said it has made six deals for outsourced investment services in Japan to manage a total of 2.5 trillion yen (S$22.2 billion). One of the clients included the corporate pension of NEC.
Last month, Mercer said it will provide OCIO services to Mizuho Financial Group's local customers, including pensions and educational institutions, through the Japanese bank's Asset Management One unit.
For the OCIO business, 'Japan is probably the biggest single country-specific opportunity we have', Graham Elliot, head of Asia wealth at Mercer, said. One catalyst came last year when the Cabinet Office released guidelines encouraging asset owners such as pensions, insurers and university endowments to consider using external knowledge and outsourcing, he said.
Japan has the largest pool of retirement savings in the world through the US$1.8 trillion overseen by the Government Pension Investment Fund. But the country's corporate pensions also hold around 84 trillion yen in assets, according to data from three industry associations.
Elliot compared Japan's current corporate defined-benefit pension system to that of the UK in their evolution process. In the past two decades, British companies have increasingly embraced outsourced services, and Japan is moving in that direction as well, he said.
Japan's life insurance market – with about 790 trillion yen of individual life and annuity policies at the end of 2023 – is the second largest in the world, also providing a ripe potential source of business for such third-party asset management services.
For Goldman, managing a portion of assets for more corporate pension clients or insurers is a priority to expand its asset and wealth management business, Tsutsumi said. Senior managers see Japan as a key area in the revamped division, he added.
'The environment in Japan is attracting a lot of attention from overseas,' he said. BLOOMBERG
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