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Sumitomo Mitsui Trust Asset Management Expands Footprint in the Middle East

Middle Eastern Sovereign Wealth Fuels Japanese Firm's Growth, Emphasizes Passive Investments
s 8309.TSE Blue Chip 150
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In a strategic expansion, Sumitomo Mitsui Trust Asset Management, a Tokyo-based asset management giant with approximately $600 billion in assets under management, is making significant inroads into the Middle East, a region that now accounts for 90% of its international investor base. This push into the Middle East has been marked by a substantial increase in mandates from sovereign wealth funds and institutional investors, highlighting the deepening economic ties between the region and Japan. The company’s international assets, primarily driven by the Middle East, have surged to around $30 billion.

The relationship between the Middle East and Japan, fortified by historical economic connections, has paved the way for Sumitomo Mitsui to secure a competitive stance against Western asset managers in the region. Since winning its first Middle Eastern mandate in 2012, the firm has seen its global assets more than double in five years, buoyed by a nearly fivefold increase in passively managed global equities and fixed income to $23 billion.

Sumitomo Mitsui’s approach to managing passive Japanese equity and fixed income investments has been to leverage Tokyo’s market insights to generate incremental alpha, reflecting a nuanced understanding of micro-market inefficiencies. This strategy has led to a 33% increase in passive investments from overseas investors in Japanese equities and fixed income, totaling $5.7 billion.

Moreover, the firm is actively engaging with Middle Eastern investors to align investments with Shariah standards and respond to growing concerns over climate change, demonstrating a commitment to sustainable investment practices. As Sumitomo Mitsui eyes further expansion, including potential staff increases in its London office to better serve Middle Eastern clients, it underscores the importance of its global business in achieving a long-term goal of reaching 690 billion yen in assets by 2030. This global orientation, likened to Japan’s reliance on trade, reflects the firm’s strategic vision for growth through international collaboration and investment.

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