T Rowe Price Eyes Japan Expansion, Is Long-Term Bull on Nikkei

(Bloomberg) -- T Rowe Price Group Inc. plans to beef up its operations in the Japanese market.

The U.S. money manager, which oversees more than $1 trillion globally, plans to increase the size of its Japan team to about 70 people in three years from its current level of more than 40 people, Naoyuki Honda, president and chief executive officer of the firm’s Japan unit, said in an interview in Tokyo. For example, the company plans to recruit what it calls portfolio specialists, a role between fund manager and sales person, around the start of next year, he said.

T Rowe Price has a positive outlook for Japanese equities in the longer term, Archibald Ciganer, co-head of Japanese equity and portfolio manager, said in the interview. He says the country’s stock market is now ripe for stock pickers such as his firm. Ciganer oversaw about $2.2 billion in Japanese stocks at the end of June, while T Rowe Price managed about $19.1 billion in the country’s equities.

The Baltimore-based money manager sees opportunities in Japan in areas ranging from technology and automation to the tightening labor market and the aging of society, according to Ciganer. It’s also positive about the steps Japan Inc. has taken to improve corporate governance. Ciganer cited the increase of outside directors on boards and the increased receptiveness of company CEOs to ideas presented in investor meetings.

The T Rowe Price Japan Fund, which is managed by Ciganer, has beaten 87 percent of peers so far this year, according to data compiled by Bloomberg. It’s delivered a 9.1 percent annualized return over the past five years, the data show. The fund is supported by a team of seven people in Japan and a global team, according to Ciganer.

The fund counts SoftBank Group Corp. and Nippon Telegraph & Telephone Corp. among its largest holdings, according to data compiled by Bloomberg. Ciganer says SoftBank is a model of good corporate governance. Masayoshi Son is supported by a board that contains mostly outside directors that have strong independence from the company, he said. They include billionaires Tadashi Yanai of Fast Retailing Co. and Jack Ma, who will step down as executive chairman of Alibaba Group Holding Ltd. next September.

“The Japanese market was behind compared to the U.S. and European markets, but it’s quickly catching up, and returns that investors can get are increasing,” Ciganer said. “I’m bullish in the medium to long term.”

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