Nikko Cordial To Use FOLIOfn Technology To Market Separately Managed Accounts In Japan

FOLIOfn, an online brokerage and technology firm, has formed a partnership with Nikko Cordial Corporation, one of Asia's largest financial services groups that will enable Nikko to use FOLIOfn's portfolio management and trading technology to create and market the first

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FOLIOfn, an online brokerage and technology firm, has formed a partnership with Nikko Cordial Corporation, one of Asia’s largest financial services groups that will enable Nikko to use FOLIOfn’s portfolio management and trading technology to create and market the first separately managed account programs to be offered in Japan. Nikko will launch its marketing effort for the separately managed account offering, to be called “Premier-port,” in April.

FOLIOfn’s portfolio management and trading technology will provide the systems backbone for Premier-port, which Nikko estimates will be at least a $20 billion business in ten years. The Web-based, portfolio management technology allows mass customization of client accounts, which can be linked to multiple investment models, enabling thousands of accounts to be efficiently managed by a single financial advisor. Additionally, all accounts managed in the system can be customized, for example, for specific security exclusions, tax strategies or other reasons.

“We conducted a worldwide search for a technology platform for Premier-port, and we have chosen FOLIOfn’s system for its flexibility, innovativeness, ease of integration and scalability,” says Nikko Cordial Advisors Chief Executive Officer Yoshishige Saigusa. Nikko Cordial Advisors, Ltd., an investment advisory company, is a new Nikko subsidiary that has been created to direct Nikko’s managed accounts business, and is licensed to use FOLIOfn’s technology in Japan.

“We are very pleased that our technology was chosen as the lever to open this new market in Japan,” adds FOLIOfn Chairman and Chief Executive Officer Steven M.H. Wallman. “Nikko is a visionary company, and we are excited to be partnering with them in this venture that, we believe, will change the securities marketplace in one of the world’s largest financial markets.”

Nikko will market Premier-port through Nikko Cordial Securities, Inc., one of Japan’s largest, full-service securities companies, which offers investment products and services to individual investors. Nikko Cordial Securities will also establish Premier-port Advice Centers in its retail facilities to market and service Premier-port separately managed accounts.

“We are targeting a range of affluent investors, from the ‘mass affluent’ to ‘high net worth’ investors,” Saigusa says. “These are people who want a more individualized managed investment vehicle than a mutual fund, and we believe Premier-port will provide the combination of customization and sophisticated investment management they are seeking.”

Nikko’s commitment to making separately managed accounts an important part of its business is underscored by the fact that the company has joined the Washington DC-based Money Management Institute, the trade association for the managed accounts industry, and has become its first international member.

In the United States, separately managed accounts are achieving popularity with the same affluent market segments, and realizing faster sales growth than mutual funds. According to Boston-based Financial Research Corporation, assets in separately managed accounts increased by 29 percent in 2003, while mutual fund assets increased 25 percent.

The efficiency of FOLIOfn’s portfolio management technology, its fractional shares trading capability and its “window trading” system, which dramatically lowers trading costs by internally aggregating and netting all trades in a given security from all accounts, allow separately managed accounts to be cost-effectively offered to a broader range of investors than previously has been possible. These investment vehicles traditionally have been limited to high net worth investors.

Adapting FOLIOfn’s system for Nikko’s Premier-port program required innovative solutions for a number of significant challenges. For example, FOLIOfn created a generic Application Programming Interface to allow its technology to interface with Nikko’s existing portfolio accounting system. The “front-end” of FOLIOfn’s system had to be adapted to accommodate Kanji, the Japanese alphabet system of approximately 2,000 characters.

FOLIOfn also added the ability to short-sell securities to accommodate mixed “long-short” models planned for the separately managed account program. The company adapted its system to accommodate Japanese securities and currency, and other functions were made to satisfy the demands of regulators and Japanese investors. The pages of the Web-based system were given a look-and-feel, and navigation reflecting Nikko’s branding and operational needs. FOLIOfn also trained Nikko’s IT developers to equip them to launch and maintain the system.

“The task was very comprehensive,” says Wallman, “but it was made much easier by the fact that our system is Web-based and totally agnostic in its ability to support any language, security type or currency. This capability was extremely important to Nikko.”

FOLIOfn’s technology currently is being used by more than 800 financial institutions on either a turnkey platform or licensed basis.

“In the licensing arena, we’re seeking and forming alliances with domestic and international partners who can provide scale, access to important markets and other strategic advantages,” concludes Wallman.