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Earlier this month Carmelo Anthony, the 10-time National Basketball Association All-star, three-time Team USA Olympic gold medallist and two-time Male Basketball Athlete of the Year, barrelled through Tokyo on a week-long tour.
His hosts were life insurers, asset managers and mega banks. A few of them managed to get the New York Knicks legend to sign shirts and caps but Anthony was there on business: the punishing, end-to-end schmooze-slog required to raise private equity funding in increasingly testy global markets.
He is not alone, but is he the low or high-water mark of a global drive to secure funds in Japan?
For now, his efforts look pioneering, or at least part of a large vanguard. Since the start of 2024, bankers and fund placement agents who have organised similar tours say that Japan has seen a constant influx of private equity funds. Their managers see the country’s big financial institutions and its hinterland of wealthy individuals as the greatest untapped opportunity for new capital. The appeal of Japan has soared, they add, in tandem with the rising difficulty of convincing investors in North America and Europe to part with more cash.
Crucially, the effort by Anthony, who is raising money for a fund that he co-founded which aims to deploy $750mn in sports-related investments in the US and elsewhere, is part of a broad revival of the mythology of the Japanese “wall of money”. Alarm bells should ring.
For decades this phrase has played an evocative but ultimately disappointing role in building bullish market narratives. The wall of money — shorthand for the immense financial assets of Japanese households which were clocked (including liabilities) at ¥2.1 quadrillion ($13tn) in June 2023 — has repeatedly been pitched as a force straining to be unleashed. Often the idea has included the institutional money working on these households’ behalf.
The narrative sporadically gained strength in the years that Japanese rates were ultra low, as did the assumption that institutions would be more aggressive and households would put their vast cash and deposits to work chasing yield. European bond markets, emerging markets, US property, project finance — all have been on the brink of being “walled”. At best they have received only a modest consignment of bricks.
But this latest hypothetical wall may be different. Not long after Anthony flew back to the US, hundreds of institutional investors arrived in Tokyo from around the world for conferences hosted by CLSA and Morgan Stanley MUFG. As always, the aim with these gatherings is to reignite interest in Japanese stocks. Morgan Stanley has declared Japan’s hitherto under-developed wealth and asset management industry poised for “momentous change”.
The scale of structural shift it predicts has a wallish feel. The combination of reflation, policy support and demographics, it says, are leading Japanese individuals to actively diversify their assets into stocks, bonds and alternative investments. The financial assets of the upper affluent, very wealthy and super wealthy will by 2030 rise $1.4tn from current levels. The resulting revenue opportunity for financial institutions over the period could top $42bn.
For those anticipating ever greater diversion of Japanese wealth into private equity, alternative investments and other asset classes, this is encouraging. The analysts make a strong case that a transformation is coming. The majority of Japan’s financial assets, they note, are held by the over-60s; the employment rate for those aged 65-69 reached 50 per cent for the first time in 2021; the public pension payouts per head for the generation retiring in around 2040 will be far lower than for current retirees. No one can afford the investment reticence that has dominated since the early 1990s.
Japanese and foreign financial institutions, meanwhile, have generally failed to provide a sophisticated service to the mass affluent and very wealthy. Their moment has now arrived. In April, both of Japan’s largest traditional securities houses — Nomura and Daiwa — rebranded their retail operations as “wealth management” divisions and are targeting richer clients. Nomura in particular has said it is pivoting away from traditional brokerage into private assets. This may or may not be overdue; it certainly sounds transformational.
Whether all this produces the fabled wall of money remains to be seen. And even if the wall does emerge it may, for a time, find more opportunities at home than overseas. The arrival of a basketball star’s private equity fund, though, may yet be part of a rising tide.