Nomura Asset Management Restructures its Flagship Fund Amid Challenges

Nomura Asset Management's $8604.T flagship fund, once dubbed the "¥1 Trillion Fund" due to its massive size, is undergoing significant restructuring after years of underperformance. The firm announced plans to merge the Nomura Japan Equity Strategy Fund with its long-standing Nomura Japan Open fund, aiming to address declining returns and regain investor confidence.

Why is the Fund Being Merged?

The Nomura Japan Equity Strategy Fund, launched in early 2020, initially capitalized on a booming technology sector during the IT bubble. In just a few months, the fund's net assets surged to ¥1.167 trillion (approximately $7.8 billion). However, as market conditions shifted, its performance began to decline, leading to a loss of investor interest.

Key reasons behind the fund’s restructuring include:

• Underwhelming Performance: Across the past five years, the fund underperformed the Topix Index in four of those years.

• High Expense Ratio: Investors were burdened with an expense ratio of 2.08%, significantly higher than the industry average of 1.65%.

• Declining Asset Base: By 2025, the fund’s value had plummeted to ¥55.7 billion, approximately 5% of its peak level.

These factors catalyzed the decision to consolidate the fund with Nomura Japan Open, a move aimed at streamlining operations and boosting returns.

Japan’s Aging Society and Investment Challenges

The fund's underperformance reflects larger trends in Japan's investment landscape, where policymakers are urging households to allocate more savings into investment vehicles. This push is driven by Japan’s rapidly aging population and the growing pressure on pension systems.

• Demographic Challenges: Japan has one of the fastest-aging populations globally, creating significant stress on both public and private retirement systems.

• Shift Toward Global Markets: Faced with limited domestic investment opportunities, Japanese households are increasingly turning to international markets, seeking higher returns abroad.

As a result, fund managers in Japan are under mounting pressure to improve performance metrics and reduce costs in order to remain competitive in a globalized investment landscape.

Future Outlook for Nomura Asset Management

By merging its funds, Nomura Asset Management aims to streamline expenses, focus on higher-performing strategies, and improve investor confidence. This restructuring is seen as a step toward reinvigorating its domestic investment offerings and competing effectively on a global stage.

Nomura’s decision to merge its struggling ¥1 Trillion Fund with Nomura Japan Open underscores the importance of adaptability in navigating the complexities of changing financial landscapes. Amid shifting demographics, increasing globalization, and rising investor demands for cost-efficient products, this move is strategically aligned with both internal and external pressures. By leveraging this restructuring, Nomura aims to solidify its presence in Japan’s investment market while remaining competitive internationally.