IFR Editor-at-large Keith Mullin
He stood down from his position as chairman and CEO of Nomura’s wholesale division and COO of Nomura Holdings in 2012 as part of the settlement with Japanese regulators over the insider trading scandal in Nomura’s equities division.
I caught up with him before he formally took up his new position in his first interview since Nikko AM announced he was joining. He was in typically upbeat mood. Neither the stresses of his twilight period at Nomura nor the tough – some would say ill-fated – period since he and then-CEO Kenichi Watanabe engineered the acquisition of Lehman Brothers’ European and Asian businesses have dulled his hallmark sense of humour.
The topic of Nomura is off the table; disappointing but understandable given the circumstances of his Nikko AM debut. I suspect it’s still a painful topic for the Nomura almost-lifer who joined the firm in 1976. There’s no doubt he’s a good catch for Nikko AM: “I have a very extensive and deep external network. I have relations with major institutions, I maintain a lot of clients and I still have a lot of product expertise,” he said. The doubtless fat cheque he could have picked up from a foreign house wasn’t of interest to him. “Not at my age,” he said.
I’m curious to know what attracted Shibata to asset management and to Nikko AM. After all, even after its busy acquisitive streak, the firm is hardly among the titans of global asset management. With US$162bn of AUM and around 250 investment professionals, it ranks near the bottom of the top 100. But size isn’t everything: Shibata is impressed by Nikko AM’s growth. “The idea of working for a Japanese company with a global reach was a real attraction,” he said.
And he likes asset management. “I ran Nomura Asset Management for three years and at the time I thought life was good. In the asset management industry, you don’t really have to worry about conflicts of interest so there is no conflict management. You really have only one responsibility, which is a fiduciary responsibility towards clients,” he said.
Split roles
At Nikko AM, he will work closely with Charles Beazley, the firm’s British president and CEO who is responsible for managing the business day-to-day. As a matter of good governance, Beazley had wanted to split the CEO and chairman roles, so he relinquished the latter on Shibata’s arrival. Shibata’s formal responsibilities will cover corporate governance, the board and strengthening relationships with all stakeholders, particularly Nikko AM’s shareholders.
This latter point is Important. What is not universally appreciated is that Nikko AM is not a captive fund manager; it is run as an independent. Sumitomo Mitsui Trust Holdings is the majority owner but DBS Bank is the second largest shareholder and the firm has developed a network of third-party distributors among securities companies, commercial and regional banks.
Shibata will reinforce relationships with business partners and clients, and work to unite Nikko AM’s increasingly multinational workforce. This plays well into his strengths. “I like to define myself as a bridge between different cultures, between East and West. That is something that I can do quite productively. Also I still have a dream of helping the Japanese market become more globalised,” he said.
Shibata thinks Nikko AM needs to do more in the institutional market both in and outside Japan. “When I look at the relative performance of our products, it’s very good, but they’re not well represented so this is one of the natural areas of growth,” he said.
I ask him how the globalisation aspect differs between investment banking and asset management. He’s clear on that: “The headcount required to have a critical mass is much smaller for asset management companies than for banks. And in terms of nimbleness it’s easier for asset managers to act as if they are global institutions. If you look around the world, it’s difficult to find investors whose portfolios are 100% local. There may be a home bias but investment management is naturally global and the cost of the transformation from domestic to global is somewhat lower.
”Asset management consists of various styles, processes and philosophies so you can be different, which makes it more interesting. If you look at investment banking, there’s essentially one style: the American style. The Americans are winning; the Europeans are retreating. As for the Asians, they’re still aspiring – in this regard it’s a bit like David and Goliath but where David is still very small,” he quips.
He says his primary role as chairman is to make sure that the firm delivers quality products, performance, advice and services to investors. He also has a fiduciary responsibility to provide the best services and products to distributors. From an internal perspective, he needs to make sure that the working environment and motivation are right so that employees and management can execute in the most professional manner. “I’ll continue my lifestyle theme of being a bridge between East and West. I also need to be uniter because Nikko AM is a very diverse group of people with many passport holders. It’s very important that we build a firm that is united.”
Having undertaken so many acquisitions, Shibata sees his role as taking a group of locally-independent disconnected asset management companies and pulling them into a coherent whole that adds real value and delivers results. Achieving this doesn’t preclude additional individual or team hires, Shibata says, or even more acquisitions. “I think that as of now, it is very important that we increase the productivity of what we have so that we can prepare for the next stage of growth.”
Shibata thinks Nikko AM needs to do more in the institutional market both in and outside Japan. “When I look at the relative performance of our products, it’s very good, but they’re not well represented so this is one of the natural areas of growth,” he said.
Prepping IPO
Shibata will help position Nikko AM for its IPO. At the last attempt to float in late 2011, the firm was forced to pull its US$585m-equivalent deal in difficult market conditions. “We cannot fail twice,” Shibata said. “That basically means going back to basics and making this company better and more stable. It’s important to maintain our aspiration to do the IPO but the IPO is not an end-point.
“We want to ensure the firm is well positioned to bring sustainable value to all stakeholders. The temptation is to go to the market when it’s hot and valuations are high. But we all know that markets don’t stay hot forever so sustainable value is very important. At the time of the previous attempt, we were talking about acquisitions as a way forward. Now it’s time for us to make those acquisitions work. We need to make sure they add value to the network and vice-versa.”
Shibata sees multiple value drivers behind the IPO. Among the most important is brand. Nikko AM is an independent asset manager in a context where most other asset managers in Japan are captive. “We have great opportunities but we also have challenges. Those challenges would be made easier with a bigger brand in a country in which the status of publicly-traded companies means a lot.
“Second: via our IPO we can create a currency for acquiring and retaining talent but also for acquiring businesses, so a listing would not only increase the stability of the workforce it would also increase the range and the scope of business possibilities. Third, if you are a publicly-traded company, you are under scrutiny every day. This allows you to improve internal controls, compliance and services. You and I know that those efforts are never-ending but external eyes are a very important source of motivation to do things right.”
