BlueBay | enriching the fixed income product offer in Japan with UK expertise

BlueBay was founded in the UK in 2001 by two founders with institutional shareholders, Barclays and Shinsei Bank. It is a specialist fixed income manager that leverages hedge fund technology.

BlueBay started expanding its footprint to Asia and established its Tokyo office in 2005.

In 2010, BlueBay was acquired by the Royal Bank of Canada’s multi-billion dollar Global Asset Management (RBC GAM) division.  Following the acquisition, BlueBay Asset Management plc changed its corporate status from a public company to a private limited company and was renamed BlueBay Asset Management Ltd on 5 January 2011. 

We spoke to Mr Ken Yoshida, Partner of BlueBay Asset Management who manages the Tokyo office, about their development and the UK’s unique offer to Japanese investors.

Can you tell us more about BlueBay’s operation in Japan?

Japan is a deep market for a fixed income house like BlueBay. It is the third largest economy and third largest pension fund market in the world, with a higher fixed income allocation than other markets. I joined BlueBay in 2003 with the mission to explore the Japanese market for the company. We set up a representative office in Tokyo in 2005 and later it grew into a full branch with local investment manager license. In 2017, BlueBay Japan’s assets under management (AuM) reached US$10bn for the first time.  

How did BlueBay tap into the Japanese market?

On the back of our resources, global network and hedge fund heritage in the UK, we continuously roll out new products tailored to Japanese investors.

BlueBay gained its first success in Japan with the principal-guaranteed products tailored to local banks. At that time high credit quality money market products were in high demand in Japan. The product was largely supported by resources from one of BlueBay’s institutional investors – Barclays. It was built on Barclays’ technology and the AA medium-term notes issued by Barclays. BlueBay raised around US$800m and gained the footfall for a representative office.

After the 2008 financial crisis, we started to attract fixed income mandates from large Japanese institutional clients, including megabanks and investment companies. At that time foreign credit market in Japan was dominated by US firms and US dollar products. Japanese investors were looking to diversify investments to reduce exposure to US assets. However, only a few European firms offer fixed income credit products. BlueBay captured the demand for non-US dollar denominated credit products and created a new fixed income offer in Japan riding on the in-house hedge fund strategy.

After the success of winning large institutional clients, we extended to the retail mutual fund market and continue to roll out products that are new in the Japanese market. For example, we rolled out the first high-yield emerging market bond funds in Japan.

How does BlueBay’s UK expertise contribute to the company’s success in Japan?

The UK is a centre of excellence for asset management and that is reflected in our service – we demonstrate strong performance records against the competitors and continue to roll out unique specialist products. Resourcing and close communication with the UK office is part of our offer in Japan. For example, the Tokyo office communicates directly with portfolio managers and gets live updates from London. This allows us to be more agile and provide a speedy turnaround to client requests. This is particularly valued by Japanese institutional investors.

The UK’s expertise also enriches offerings in the Japanese market. Japan already has a large exposure to US managers and their products, most of which are US-centric and denominated in US dollar. The UK offers more options for diversification, such as products denominated in pound sterling and euro.

Strategies from the US are often more mathematics and financial driven, while the UK managers also approach investment from other angles such as ESG and policy development. Such differentiation provides access to a wider range of investment options and helps Japanese investors to diversify.

Access to international talent in the UK is also highly valuable. We can hire talent from different nationalities and build strong local knowledge, which in turn strengthens our global network and offering. We also introduced positive corporate culture from the UK to Japan, such as work-life balance and diversity. In our Tokyo office, 52% of the employees are female. This is an exceptionally high female representation for a financial services firm in Japan.

Even though New York City is very metropolitan, London is the city that offers a truly international talent pool.