by Noriyuki Morimoto
Nomura Securities responded to the Financial Services Agency’s (FSA) policies and set out new management principles that strengthen control over conflict of interest. This has great significance for Nomura Holdings, the parent company of Nomura Securities, because it seems to lose rationale for holding both Nomura Securities and Nomura Asset Management as core businesses.
Between Nomura Securities and Nomura Asset Management, there is a risk of conflict of interest for all operations related to asset management. In eliminating all risks of conflict of interest under the new management principles, the two companies should sever all ties in the forms of business philosophy, human resources, sales support, information exchange, and so on.
For Nomura Securities, Nomura Asset Management is now merely one of many managers of investment trusts, and for Nomura Asset Management, Nomura Securities is just one of many companies that sell its products. Now that their brotherhood has completely lost its meaning, Nomura Holdings would be questioned of the logic behind holding two unrelated companies, as such a structure cannot completely get rid of the potential risk of conflict of interest.
It is likely that some members of the investment community immediately thought of the difficulty the two companies would face in coexisting. That was what actually came to my mind, and I was also asked very candidly by the representative of a renowned foreign management firm about which of the two companies I thought would be sold off by Nomura Holdings.
Of course, Nomura Holdings can expect to raise overall efficiency by holding multiple unrelated businesses with different revenue structures, based on portfolio theory or financial conglomerate strategy. As a financial group, conglomerate strategies are also under the restriction of business scope, so investment management seems to be an attractive business which only requires small equity capital.
Then, how is the situation outside of Japan? When a financial group holds an investment management business, the only feasible way is rationalization based on portfolio theory. It is also rare to share trade names within the group: companies in the same group usually have unrelated names. There are also quite a few financial groups which do not hold investment management businesses. This is because investment management is basically an independent and specialized business in the first place.
Chief Executive Officer, HC Asset Management Co.,Ltd. Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (now Willis Towers Watson) in 1990.