Japan's Monex to launch retail activist fund to pressure companies for better returns

TOKYO, Feb 25 (Reuters) - Japanese online brokerage Monex Group Inc will launch a retail investor fund aimed at pressuring companies to boost returns following calls from foreign activists.

Monex Group, set up in 1999 by a former Goldman Sachs Group banker, will start a retail engagement fund with a longer term investment perspective than existing activist funds, said Oki Matsumoto, founder and chief executive of Monex.

By tapping retail investors, Monex is looking to leverage a immense pool of capital. Japanese households hold about 1,830 trillion yen ($16.4 trillion), of which half is in cash or in bank savings that pay almost zero interest.

Oki said that the fund would need to support the sustainable growth of companies and share prices.

“An activist fund can exit after getting a short term gain from a target but if the target’s cash is absorbed by that, this company would not be able to grow,” Oki told a group of reporters on Tuesday.

The fund, which will start raising cash from June, will invest in about a dozen companies, Oki said. Oki’s team will meet company management and raise issues that retail investors are concerned about, he said.

Activist shareholders are becoming more vocal as corporate management respond to investor proposals amid a government push for better corporate governance.

Earlier this month Japanese broadcaster Tokyo Broadcasting System Holdings flagged a one time gain and increased its dividend forecast after selling part of its stake in another company.

The broadcaster did not name the company but the sale came after a 2018 proposal from London-based Asset Value Investors for the broadcaster to sell down part of its holding in Tokyo Electron Ltd.

Investor calls for better returns are also slowly changing Japanese corporate practice.

Hostile bids have long been taboo in Japan but a number of companies, including travel agent H.I.S. Co, optical product maker Hoya Corp and stationary maker Kokuyo Co have launched unsolicited bids to seek growth through mergers.

“Japanese corporate governance has made significant progress since the introduction of the governance code,” said Oki. “We need one more push for this.”

“I hope our fund can become the final thrust.”

$1 = 111.5700 yen Reporting by Junko Fujita; Editing by Kirsten Donovan