Business / Corporate

MUFG arms itself with ¥1 trillion war chest for acquisitions

by Gareth Allan and Shingo Kawamoto

Bloomberg

Mitsubishi UFJ Financial Group Inc.’s trust banking arm is seeking acquisitions abroad and has ¥1 trillion to spend as it seeks to become one of the 15 biggest asset managers worldwide.

“We’re going to make acquisitions on a scale we never have before,” Mitsubishi UFJ Trust & Banking Corp. Chief Executive Officer Mikio Ikegaya said in an interview in Tokyo.

The unit aims to boost assets under management to ¥100 trillion by as soon as 2020 from ¥60 trillion now, he said.

Under a strategy announced by MUFG in May, the financial group will transfer about 2,600 corporate accounts with ¥12 trillion in loans from Mitsubishi UFJ Trust to its main lending unit next year.

Removing those assets from the trust bank’s balance sheet will free up capital for takeovers as it seeks to build a new business model focusing on fee-generating businesses like asset management and consulting, Ikegaya said.

A wave of consolidation is sweeping the asset-management industry as firms seek to cope with pressure on fees due to stricter regulations and competition from low-cost passive funds.

This year, Standard Life PLC agreed to acquire Aberdeen Asset Management PLC in a deal valued at about $5 billion, Janus Capital Group Inc. and Henderson Group PLC completed their merger and SoftBank Group Corp. announced plans to buy Fortress Investment Group LLC for $3.3 billion.

Ikegaya said he is looking for opportunities to take controlling stakes in firms in the U.S., Europe and Asia, while noting that no specific transactions are in progress yet. Possible targets could include relatively inexpensive index managers or highly specialized active managers as well as smart beta funds, the CEO said.

As well as building scale, the deals would help the company deepen its expertise in managing funds, he added.

Ikegaya said he wants to encourage customers to shift more of their deposits into investments, and making acquisitions would help the firm attain the size and “level of quality” needed to achieve this.

Japanese households have ¥1.8 quadrillion in financial assets, about half of which are sitting in bank deposits earning paltry interest.

Asked when the company might achieve the target for assets under management, Ikegaya said “by the end of our next medium-term business plan in 2020 could be one guide.”

While there are no Japanese firms among the world’s top 15 asset managers — a list headed by BlackRock Inc. — Mitsubishi UFJ Trust isn’t the only one to aspire to that distinction.

Asset Management One Co., formed last year through a merger of units of Mizuho Financial Group Inc. and Dai-ichi Life Insurance Co., plans to double managed assets to more than ¥100 trillion, CEO Yasumasa Nishi said in September. He didn’t give a time frame.

MUFJ Trust is also seeking to expand its real estate business into areas such as office management. Ikegaya said he plans to establish a division to handle this as soon as October and increase staff to about 100 from 20 now. The bank, which currently focuses on handling property transactions, will also consider investing in its customers’ real estate development projects.