Pedigree, big returns lured investors to AIJ

Clients of pension fund 'blinded' by the presence of Nomura veterans

by Takahiko Hyuga

Bloomberg

A pension fund based in Nagano Prefecture said it invested with AIJ Investment Advisors Co., whose business has been suspended by regulators, because it was run by a former Nomura Holdings Inc. manager and offered 7 percent returns.

“We believed in such high returns as we were assured that the business is being led by a former Nomura branch manager,” Toshiro Katsuno, a board member of Koshinetsu Printers Association Pension Fund, said Monday. “People become blind in front of such a big name.”

Katsuno said the association manages about ¥10 billion in pension assets for 3,000 print workers in Nagano Prefecture. It began investing with AIJ in 2005 and still has “a significant portion” of assets with the firm, he said, declining to specify how much.

Kazuhiko Asakawa, president of Tokyo-based AIJ, used to work at Nomura, Japan’s biggest securities company.

The Financial Services Agency on Friday ordered AIJ, which had ¥185.3 billion of client money as of March, to stop business for a month as the regulator investigates possible losses at its hedge funds.

That has led to the biggest probe in the history of Japan’s fund industry, as the FSA examines 263 asset managers nationwide.

AIJ told investors one of its funds returned 241 percent since it started in May 2002 by mainly trading Nikkei 225 options, according to a newsletter obtained by Bloomberg News.

“This is fraud and should be a criminal case,” Katsuno said.

To seek information, Katsuno visited AIJ and its brokerage, ITM Securities Co., which are located in the same building in Tokyo’s Nihonbashi district, on Friday when the FSA announced the suspension. He said he was unable to meet with Asakawa.

Neither AIJ, Asakawa nor ITM have been accused of wrongdoing.

Asakawa went to Nagano in June 2010, along with ITM Securities founder Hideaki Nishimura, and made a presentation to executives of the pension fund, including Katsuno, to explain the performance of AIJ’s funds. The association invested in three of them, including one called AIM Millennium, Katsuno said.

Asakawa isn’t the only former Nomura employee at the fund manager. Shinpei Matsuki, chief investment officer at AIJ, was one of three ex-Nomura executives who received suspended sentences in 1999 for paying off a corporate extortionist who threatened to disrupt the brokerage’s 1995 shareholders’ meeting.

“The AIJ persons quoted in the media reports as ex-Nomura left Nomura more than a decade ago,” Keiko Sugai, a Nomura spokeswoman said. “Nomura did not participate in the wrongdoings reported by the media.”

Calls to AIJ reached an automated recording that didn’t take messages. Asakawa couldn’t be reached for comment. Yasuo Tsuneyoshi, a manager at ITM Securities, declined to comment.

AIJ’s AIM Millennium fund returned 3.9 percent in the six months through last September, according to the four-page October newsletter in Japanese. That compares with an 11 percent decline in the Nikkei 225 stock average and 12 percent retreat in the broader Topix index.