MUFG seeks to buy alternative asset firms to match client flows

Mitsubishi UFJ Financial Group is seeking to acquire alternative asset managers as more client money flows into non-traditional investments.

Japan's biggest bank has seen a big increase in bets on private assets such as real estate and infrastructure as customers try to diversify portfolio risks, said Takayuki Yasuda, head of MUFG's asset management and investor services business group. "We haven't been able to meet demand," he said in an interview.

Private assets have garnered attention after last year's slump in global bonds and stocks called into question the viability of traditional 60/40 portfolios. MUFG has already been snapping up alternative asset managers, most recently in March with the deal to acquire Europe's AlbaCore Capital Group through its First Sentier Investors unit.

"Our target is in private asset areas," Mr. Yasuda said. "For instance, we have infrastructure equity products offered by FSI, but there are blank fields in infrastructure debt," he said, referring to Sydney-based First Sentier Investors, which it purchased in 2019 for about A$4 billion ($2.7 billion).

MUFG operates asset management companies in Japan and abroad, serving retail and institutional clients like pension funds. With about 100 trillion yen ($743 billion) in assets under management, it's among the biggest Japanese firms in the industry.

Mr. Yasuda said there are clients whose risk appetite has diminished after rising yields pushed down the value of their foreign bond holdings. "In such a situation, demand is very strong for products that generate constant cash flow, including overseas real estate."

Japanese regional banks and other institutional investors have been hit by the sharp rise in U.S. interest rates. The same could happen in Japan if the central bank launches a pivot from its ultra-easy monetary policy under new Governor Kazuo Ueda, though that seems unlikely to happen soon.

Mr. Yasuda said there is a risk of a slowdown in client activity if their yen-denominated holdings are impaired following any increase in interest rates in Japan.

But a rise in the yen against the dollar may have a bigger impact on clients' portfolios, he added, pointing out that currency swings resulting from any monetary tightening are likely to be sharper than changes in rates themselves. The bank is planning to offer services that will mitigate such currency risks, he said.