Daiwa Securities Group

Daiwa Securities Group is one of the three largest security brokerages in Japan. It owns a large number of companies, almost all of them branded under the Daiwa name. As well as the main security brokerage, there are asset management, property, research, investment banking and venture capital specialists under the Daiwa Securities arm. It was the first Japanese company of its size to move to a holding company structure, a structure that has been discouraged by Japanese corporate tax laws. Daiwa Securities is a rather loose holding company with its constituent parts going after different market segments with different corporate messages.

The investment banking arm is Daiwa Securities Capital Markets Co Ltd, which until 2010 was known as Daiwa Securities SMBC Ltd. Daiwa Securities Capital Markets is the largest specialist investment bank in Japan. It has 2,100 employees and has 21 offices operating across 21 countries.

The European subsidiary is known as Daiwa Capital Markets Europe Ltd. It has also gone through a name change, before 2010 it was known as Daiwa Securities SMBC Co. Ltd. The headquarters are in the City of London with branch offices in the main European financial centers of Paris, Milan, Dublin, Geneva and Frankfurt. It has a representative office in Moscow. It also has two offices in the Middle East in Bahrain and Dubai. There are four divisions Investment Banking, Fixed Income, Derivatives and Equity. This offering has been strengthened by the purchase of the European advisory business Close Brothers Corporate Finance.

Outside Japan it trades as a specialist in the Asian market, advertising itself as “Your Insight into the Asian Market”. Its corporate motto is “Centered on Asia, Serving the World”. It has a relatively long history overseas for a Japanese bank, opening its first overseas office in London in 1967; however its size means that it cannot hope to compete globally with large investment banks such as Goldman Sachs or Merrill Lynch.

Daiwa Securities is an important player in the Japanese government bond market, the so called “Samurai Bonds”. This is the second largest government bond market in the world. As the Japanese government has increased spending against a background of prolonged slow economic growth the government deficit has rapidly expanded and the growth of the Japanese bond market has been enormous.

Daiwa Securities Capital Markets was 60% owned by Daiwa Securities until 2009. There was a minority stake held by the Sumitomo Mitsui Financial Group. The Sumitomo Mitsui Financial Group is the second largest bank in Japan and a member of the Sumitomo group of companies. It was unusual in being a joint venture between a brokerage firm and a retail bank. In 2009 this experiment ended with Daiwa Securities announcing that it was to buy out its minority shareholder. Daiwa Securities now has total control of Daiwa Securities SMBC.

There is also an active asset management division, Daiwa Securities Global Asset Services, which often trades under the name of Daiwa Trusts. It specializes in offering various fund administration services to hedge funds, meaning that they can outsource their back office functions. It has done this since 1990. The services it offers include accounting, custodial services, company secretarial and compliance. Unlike the investment banking arm it aims to be a specialist in all the markets and does not sell itself as an Asian specialist. It sells itself as both allowing for some independent oversight as well as taking a large part of the administrative burden from smaller hedge funds.

Daiwa SB Securities is an investment management service that aims at middle market investment and pension funds. It has both investment management and investment trust capabilities. It started in 1973 and has a large presence in Asia and the Middle East.