Photographer: Akos Stiller/Bloomberg

Millionaires Fleeing Negative Yield Targeted by Japan-Swiss Fund

  • Aristagora, Dr. Blumer plan to offer fund of funds in Japan
  • Japan has second most rich individuals in world: Capgemini

Switzerland and Japan face the world’s deepest negative interest rates, and now two of their finance companies are linking up to protect the rich from the phenomenon.

Aristagora Advisors Co., a Tokyo-based investment adviser, and Dr. Blumer & Partner, a Swiss asset management company, plan to offer Japanese individuals and companies a global fund of funds that will include structured bonds to reduce volatility in returns, according to Aristagora’s Chief Executive Officer Takeshi Shinoda. The fund already went on sale in Europe and China in June, and is targeting an annual return of 10 percent to 15 percent.

“The number of people facing difficulty in finding a place to put their money is growing,” Shinoda, the former head of Japanese equities and equity derivatives at BNP Paribas SA, said in an interview. “Financial institutions in Japan’s regions are also starting to show interest in this kind of investment under minus interest rates.”

The Bank of Japan’s adoption of negative rates in January, a year after their introduction in Switzerland, has sent yields on sovereign debt deep below zero percent just as Japanese stocks plunge. Japan has the second-biggest population of high-wealth individuals after the U.S. and they are the least satisfied with their asset managers, according to a report by Capgemini SA in June. 

Surveys of Japanese since the negative-rate policy started have shown they have become more worried about the local economy and are moving or considering shifting assets from savings to investments. Insurer MetLife Inc. published a study in May showing rates below zero had altered the investment mindset of 34 percent of respondents, and buying non-yen assets was their top choice to deal with the rate change.

The fund will start off investing in five or six different asset types, with a maximum of about 20, and is looking at buying structured bonds backed by German property, loans to small U.S. businesses, and funds invested in South African equities and Japanese stock futures, according to Shinoda.

There were 2.72 million people in Japan with $1 million or more in investment assets in 2015, more than the combined figure for China, Germany and Switzerland, according to Capgemini’s 2016 World Wealth Report. Japanese investors had the lowest percentage of their holdings outside of their home country, the report showed.

“Investors are stuck,” said Nana Otsuki, the chief analyst at Monex Group Inc., a Tokyo-based online securities firm. “The BOJ is expected to expand negative rates further and yields are falling.”

The yield on Japan’s 20-year sovereign bond fell to minus levels for the first time this week, while the Topix index of Japanese stocks has fallen 20 percent this year.

For a story predicting minus rates for all Japan bonds, click here.

The R&T Excellentia Global fund of funds, the name of Swiss-Japanese offering, may also be able to attract investments from Japanese educational and religious organizations in the future, according to Shinoda.

“By tying up with a Swiss asset manager, experienced in offering a private-banking service, we can get access to investments not readily available in Japan,” said Shinoda. “The wealthy aren’t necessarily financial experts. They don’t want to think too much about such things.”

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