Photographer: Tomohiro Ohsumi/Bloomberg

This Japanese Hedge Fund Founder Is Turning to Robo-Advice

  • Money Design attracted 5,500 accounts since February start
  • App aims to help Japanese invest abroad, founder Taniya says

Mamoru Taniya has started a hedge fund and opened an international boarding school. Now the Japanese entrepreneur is turning his attention to robo-advising.

Money Design Co., founded by Taniya three years ago, began a service in February that uses computer algorithms to propose investment plans for individual investors. Taniya is seeking to increase assets under management for the product, called Theo, to between 200 billion yen ($1.9 billion) and 300 billion yen in the next four years.

Automated investing through so-called robo-advisers was first developed by startups and is now attracting traditional money managers such as Charles Schwab Corp. and Vanguard Group Inc. Taniya wants Japanese households to use their phones to put some of their 1.7 quadrillion yen of financial assets into exchange-traded funds overseas, as a slumping stock market and negative interest rates reduce investment opportunities at home.

“More of Japan’s money should be invested in the world’s economic growth rather than be locked up here in Japan,” Taniya, 53, said in a phone interview. “As a country with a shrinking and aging population, Japan is unlikely to keep pace with global growth in the next 30 to 40 years.”

Dentsu Backing

Money Design completed a 1.5 billion yen round of fundraising in December with investors including trading house Itochu Corp., advertising agency Dentsu Inc.’s venture-capital arm and the University of Tokyo Edge Capital Co. It has hired professionals from companies including Google Inc., Nomura Holdings Inc. and UBS Group AG to increase its staff to 28, Taniya said. 

Taniya is using the technology to allow investors, particularly people in their 20s and 30s who have spare cash yet aren’t necessarily wealthy, to diversify their portfolios around the world. The Tokyo-based company plans to introduce a smartphone application for Theo, which has attracted 5,500 users to open accounts through its website since February.

“There’s huge potential demand for robo-advisers from young people in Japan,” Eiichiro Yanagawa, a Tokyo-based senior analyst at research firm Celent, said by phone. “Older generations would ask a brokerage what stocks they should buy, but their sons and daughters are more inclined to depend on technology for their investment decisions.”

For a QuickTake introduction to robo-advisers, click here.

Theo allows customers to open an account with a minimum deposit of 100,000 yen ($970) and allocates the funds to a portfolio of ETFs based on a user’s answers to nine questions, according to its website. The service, which charges a 1 percent annual fee, is able to invest in more than 11,000 ETFs in 86 countries and 62 currencies, Taniya said. 

Megabank Interest

Money Design faces domestic competition including “8 Now,” an iPhone application from online brokerage 8 Securities Inc. that was launched in late 2015. The robo-adviser service allows users to invest in U.S.-listed ETFs with as little as $88, said Misako Suzuki, a Tokyo-based spokeswoman. 

WealthNavi Inc., a startup backed by Japan’s three biggest lenders, plans to start offering robo-adviser services this month with a minimum 1 million yen investment, according to Chief Executive Officer Kazuhisa Shibayama. The company raised a 600 million yen funding round last year joined by investors including the venture-capital arms of Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc.

Japanese banks themselves have also started employing automated investment technology. MUFG’s trust banking arm began a robo-adviser service last year that creates a recommended portfolio after users punch in figures including their age, the level of returns they are seeking over time and their monthly investment budget, according to its website.

“Megabanks and existing financial institutions should be closely watching fintech startups, including robo-advisers, as potential acquisition targets,” Celent’s Yanagawa said.

Resort Village

Taniya spent a decade at Salomon Smith Barney before co-founding hedge fund manager Asuka Asset Management Co. in 2002. StormHarbour Securities has bought 99.9 percent of the hedge-fund manager over the past two years. He started Money Design in August 2013, a year before opening the International School of Asia, Karuizawa, in a resort village north of Tokyo.

Japanese people have more than half of their financial assets in cash, most of which is sitting in bank accounts collecting virtually zero interest thanks to years of monetary easing that culminated in the negative-rate policy introduced this year. Individuals had 894 trillion yen in cash or deposits at the end of March, the second-highest ever and more than the combined economic output of Germany and the U.K., Bank of Japan figures show.

“Saving might have been good for Japanese for a long time,” Taniya said. “But now they may need to find more investment vehicles abroad.”

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