Nomura bets big on U.S. market rebound with $1.8 billion deal
"We constantly tell our clients, stay invested through short-term volatility,' Christopher Willcox, Nomura Holdings' executive officer and chair of investment management, said in an interview after the firm's most significant deal since it bought Lehman Brothers assets in 2008. "So, if we were not to display those behaviors ourselves, we would not be particularly credible.'
With the purchase of Macquarie Group's U.S. and European public asset management business, Nomura is scooping up about $180 billion in client assets across equities, fixed income and multiasset strategies. About 90% of them are from the United States, where stocks, bonds and the dollar have faced selling pressure since U.S. President Donald Trump announced sweeping tariffs earlier this month.
Willcox said the latest disruptions don't change the fact that the U.S. remains the largest asset management market in the world. Nomura is seeking to build scale in the business to generate stable income and diversify away from the domestic retail operation as well as trading and investment banking, he said.
Nomura looked at at least 20 different possible acquisition targets, Willcox said. It may consider bolt-on transactions later to build on the platform.
"Clearly doing the deal in the middle of this much volatility is challenging and makes it harder,' said Willcox, who was once chief of JPMorgan Chase & Co.'s asset management business. "But I think on both sides of this, we feel that the deal is reflective of the market conditions.'
Nomura doesn't have a widely recognized brand name in the U.S., and the asset management business is highly competitive with the shift toward passive investing driving down fees, said Jay Ritter, a finance professor at the University of Florida.
"That said, Nomura's investment, at a reasonable price, does not involve high risks,' he said. "The assets tend to be sticky, and unlike investment banking and trading, the assets do not walk out the door every evening.'
Willcox said a lot of people have lost money betting against U.S. markets in the past 30 to 50 years. While the latest volatility is likely to persist due to the political landscape, over time, the market will find an equilibrium.
Nomura Holdings Executive Officer Christopher Willcox |
Bloomberg
"I'm not bearish about markets,' he said, pointing out that the underlying capabilities of the U.S. and global economy are still strong. "Short term, I think we're all going to suffer through a lot of uncertainty.'
Japanese investors are unlikely to suddenly start pulling assets that they have spent years accumulating abroad, even if their exposure to international markets isn't particularly big, Willcox said, adding that it's unclear what the alternatives would be.
"We'd have to be in a significantly more serious situation than now before we start to see really big asset allocation decisions out of Japan,' he said.
Because the latest market ructions happened at the start of Nomura's financial year, the company wasn't fully exposed to risk, "which is probably a good thing,' he said. Nomura reports results for the final quarter of last fiscal year on Friday.
Further volatility will present chances to trade on market dislocations, he said, citing Japanese government bonds as an example. The firm has the dry powder to take advantage of market opportunities, while also being focused on providing liquidity to clients, said Willcox, who is also chief of the wholesale division that runs investment banking and trading.
Willcox was also optimistic about prospects for dealmaking, particularly in Japan, where transactions continue to be driven by trends such as the unwinding of cross-shareholdings and corporate governance changes.
"We actually haven't seen a deal slowdown,' he said. "If the volatility continues and the uncertainty continues, it probably will have a negative effect on the deal environment.'
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