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Morgan Stanley Aims To Double Japan Assets to $50B

MSIM to benefit from Japan's AIJ loss cover-up scandal, eyes expansion in alternative business in Japan

Tokyo - Morgan Stanley Investment Management (MSIM) is eyeing a doubling of its assets in Japan to $50 billion over the next five years, banking on pension funds there increasingly seeking emerging markets exposure and on retail investors flocking to high-yielding products.

MSIM, a unit of Morgan Stanley, plans to boost its presence in Japan, where individuals hold $19 trillion in personal assets and private pension funds collectively hold about $1.4 trillion, by offering global products such as funds of hedge funds, Navtej Nandra, head of MSIM's international arm, told Reuters in an interview.

"We believe given the size of the market, our aspiration should be at least $40 to $50 billion," Nandra said. MSIM managed $21.3 billion in Japan as of end of last year and wants to hit the enhanced target in five years, he added.

MSIM globally managed about $311 billion as of June 2012. Its international business outside the United States had $113 billion in assets. Japan is MSIM's second-largest market globally, after the United States.

Morgan Stanley plans to offer capital-oriented products to institutional investors in Japan and high-yield funds with low volatility to its intermediary business, which typically provide sub-advisory services to asset managers focused on retail investors, London-based Nandra said. He was in Tokyo to mark MSIM's 25th anniversary in the country.

MSIM also wants to expand its alternative assets business in Japan, he said.

"Alternatives today for us in Japan is not a big business, whereas globally it is a fairly large part of Morgan Stanley's asset management business so we feel we are under represented in Japan in the alternative space."

Pension funds are also relying more on established global players such as Morgan Stanley after the $1.3 billion loss cover-up scandal by independent Tokyo-based asset manager AIJ Investment in early 2012, Nandra said.

"A crisis like this actually reminds clients that they should do business with respected firms and therefore it plays to our strength," Nandra said.

"Pension funds are questioning more the kind of vendor or asset manager that they have."

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