Exclusive: Nomura to shut PE unit, eyes open-ended funds (00)

Vehicles managed by Australia-based Hastings are among those considered by the Japanese firm as it seeks to meet rising domestic demand for yield and liquidity.

Nomura Trust and Banking Co., the investment unit of Japan’s biggest brokerage group which handles alternatives investments, is currently vetting infrastructure-focused asset managers on behalf of its institutional and retail clients.

Takashi Futatsugi, an executive director at the firm, told Infrastructure Investor that dwindling returns on fixed income and high valuations of listed equities made infrastructure attractive.

The decision to dedicate more resources to the asset class follows recent cuts across its Asian and North American equities as well as several unsuccessful attempts at setting up in-house alternative investment funds. The firm’s previous offerings have included private equity and hedge vehicles set up for high net worth individuals by Nomura’s former investment trust fund department, for which Futatsugi worked until 2008, as well as two Asian funds of funds launched between 2009 and 2014. The latter were met with weaker enthusiasm than the firm initially expected.

Nomura Private Equity Capital (Nomura PE), the unit through which the Asian funds were launched, is to cease existing independently as a result, Futatsugi said. Its team will now come under the umbrella of Nomura Asset Management.

Futatsugi explained that Nomura was now willing to take its time before awarding mandates, given what he believes is a plethora of managers and products on offer. But he said Japanese investors’ growing appetite for steady income-generating investments and their need for liquidity made open-ended funds his favourite option.

He singled out vehicles managed by Melbourne-based Hastings Funds Management as being in his current shortlist.

“We want to collaborate with infrastructure asset managers as we do not currently hold the expertise internally, and Hastings is a good candidate from my conversations so far,” he said on the sidelines of Infrastructure Investor’s Tokyo Forum last week. “The firm was created over 20 years ago, which we find astonishing.”

He conceded that figuring out how liquid existing open-ended structures really were represented an enduring challenge.

“Our clients will want to know when they will be able to cash in the entirety of their interests, and that is the part which we are not always sure about.”

He added that his team was primarily drawn towards core strategies in developed economies, with core plus strategies in the same markets getting second preference. He also expressed interest for infrastructure debt products, while fund of funds – which would englobe all three strategies – was yet another option on Nomura’s prospective list.