Key considerations to implement EMP
The Emerging Manager Program (EMP) was proposed in the TMG’s Interim Report on Policy for “Global Financial City Tokyo” in June 2017. EMP’s have been adopted in the US and other countries largely by local government pension funds which have their own robust investment management infrastructure with an internal CIO and portfolio managers – none of which the TMG has. Thus there are still many issues to overcome as there are very few EMP case examples in Japan. “Emergence” by Paris Europlace is one example that can be referenced by Tokyo.
▪ Excess returns and alignment of social values
▪ Investments in growth areas that promote social benefits
▪ Discovery, development and attraction of talent
▪ Creation of growth opportunities
▪ Revitalization of Tokyo’s financial industry and economy
Selection criteria for emerging managers needs to balance economic rationality with social impact. Development of small sized, independent emerging asset managers with an individual/company track record, investment strategy and style vis-à-vis asset owners’ overall portfolio optimization are also considerations. EM’s must be willing to self-fund (i.e. “have skin in the game”) and possess the ability to, and commitment for fundraising.
Key considerations to implement EMP for Global Financial City Tokyo
An interesting article appeared in the Jan. 30th 2018 edition of Ignites Asia (a Financial Times Service)
The article entitled, “Tokyo calling: Japan’s capital moves to lure fund start-ups” by Daniel Leussink states that the Tokyo Metropolitan Government (TMG) is planning to launch as early as April this year an incentive programme to attract foreign and domestic asset management start-ups to set up shop in the capital. It is seeking approval from the city’s metropolitan assembly for a one-year budget of up to ¥100 million (US$918,700) to subsidise fund start-ups’ middle- and back-office operations should they choose to set up in Tokyo. In addition, TMG is also trying to secure a one-year budget of ¥300 million (US$2.8 million) that would be given to local institutional investors to subsidise fees that they pay gatekeepers to work with fund start-ups as part of the initiative.
TMG is currently still considering the eligibility criteria for the incentive scheme. This would include length of experience and track record as well as licensing requirements. TMG estimates that the scheme would likely need to raise JPY 5 billion (or USD 46 million) per asset manager in order to make the programme viable.