Derivatives house of the year, Japan: Nomura

Risk Asia Awards 2026

The team at Nomura

Not so long ago, Nomura was a newcomer in Japan’s fiercely competitive Quantitative Investment Strategies (QIS) space. But with a revamped lineup of systematic strategies and their formidable distribution network, the firm has been quickly catching up and gaining wallet share.

“We started a few years back on equity QIS [in Japan] and we’ve been ramping up our AUM and catching up with our peers,” says Hiroshi Shikano, Nomura’s head of global markets structuring for Japan. “We may not be in the top three, but we’re definitely in the top five now.”

Since Nomura made its move into Japan QIS in 2023, macro changes have provided a tailwind for the securities house’s ambition to grow its QIS business in its home market.

Having emerged from a near 30-year period of economic stagnation, inflation in Japan’s economy is now starting to take root again. In response, the Bank of Japan has begun normalising monetary policy through successive hikes to its policy rate, while long-term yields have this year risen to highs not seen in decades. But even after these moves, the rate of inflation has consistently outpaced the central bank’s policy rate.

The result has been a dramatic reallocation by high-net worth (HNW) investors who have been moving cash en masse from traditional low-yielding deposits into investments. And spiking volatility in risk assets has also sharpened demand for portfolio diversifiers and other types of bespoke hedging strategies.

These conditions gave Nomura an opening to do something most competitors cannot easily copy. By marrying its structuring know-how with its countrywide wealth management network, the firm has strategically pivoted to serve a new client base that rivals in Japan simply cannot reach as easily – tapping into growing Japanese HNW demand for QIS.

One that became a hit with Japanese HNW clients was the firm’s Cross-Asset Momentum Daily Strategy, which tracks and trades price trends across global equities, foreign exchange and commodities, taking long positions in rising assets and short positions in falling ones. This strategy went live and was first marketed to institutional investors in early 2022. But the strategy was marketed for the first time to HNW investors in late 2024.

“A unique feature of ours is that we’re not only distributing to financial institutions but now we’ve also started to distribute our QIS product to high-net-worth clients,” says Shikano. “Japan equity is up a lot in the past few years, so we now see a lot of wealthy clients and our focus is to cover these. This is why we needed to develop very unique and bespoke products.”

For HNW investors, Nomura’s Cross-Asset Momentum Daily Strategy can serve as a useful diversifier. Typically, HNW investors in Japan have portfolios that are heavily tiled to equity and, more recently, to private funds. The Cross-Asset Momentum Daily Strategy is less correlated with such assets, making it a good tail-hedge. Investors also benefit from quick access to their funds with liquidity that is on par with firm’s deposits or money market funds, making them an ideal alternative to such products.

“This momentum type of strategy is known to act as a tail hedge to traditional products and can provide a very diversified correlation between traditional assets. This is one reason why we discussed it with our wealth management division and decided to launch this product.”

When Nomura started its Japan QIS push three years back the focus was plain carry strategies, where, for example, premium from selling options is used to fund downside protection. But investor needs have since become more complex, increasingly requiring bespoke solutions.

Hiroshi Shikano, Nomura

Meanwhile, Nomura’s equity QIS product suite for Japanese institutional clients such as pension funds and insurance companies is evolving and increasing in sophistication.

In the past year, the securities house expanded its lineup of its flagship equity QIS beyond traditional carry strategies to intraday trend strategies. The securities house has also continued to develop bespoke variations of these flagship strategies, enabling them to tailor their QIS more precisely to each client’s objectives and investment horizon. For instance, they developed cutting-edge strategies based on composite signals for intraday trading that combines intraday trend signals on Japanese and US price moves and cross-market correlations.

These strategies aim to provide a convex return profile to equity markets, performing well during bear markets and with flat performance outside of such markets.

“To begin with, the strategies were simple, but at the same time we were rapidly developing our regional trading capabilities to enhance the business platform,” says Shikano. “This enabled us to move into more sophisticated structures, including short‑term option trades using zero‑ or one‑day‑to‑expiry options, as well as embedding optionality using overlays.”

Rising rates

Nomura also sees some big risk recycling opportunities between its institutional business and the growing demand for investment solutions coming from its wealth clients as rates tick higher.

One example is the trading of Japanese government bond (JGB) forwards with insurance clients and the distribution of zero-coupon callable notes to HNW investors.

Under pressure to secure higher yields and match their longer-term liabilities, Japanese insurers have piled into private credit in recent years. Traditionally they would turn to interest rate swaps to hedge the duration on these investments. But with swap spreads widening as JGB yields have soared, swaps have become a less effective tool for hedging this risk, prompting insurers to turn instead to bond derivatives, including forwards options and total return swaps on JGBs. The tricky part of this business, however, is that bond derivatives require a lot of balance sheet.

Some of the risk Nomura can recycle through offsetting transactions using its global franchise, in particular trading JPY interest rate swaps, JGB futures and other interest rate and bond-related derivatives with its global client base. But higher interest rates in Japan have also increased the appeal of callable notes for HNW investors in Japan, providing Nomura with another means to free up balance sheet. This is because the embedded optionality can offset that of the notes. To take advantage, Nomura has started repacking JGBs into 30-year zero-coupon callable notes.

As a result, Nomura can offer attractive terms to HNW clients while also creating opportunities to provide bond derivatives to institutional investors – both in Japan and overseas – at competitive prices.

“A key advantage of this product is that we can partially offset the market risk using bond‑linked derivatives, creating a mutually beneficial structure for both Japanese insurers and Japanese wealth clients,” says Daisuke Yamamoto, managing director at Nomura. “So, we are gradually rolling out this type of product to the high‑net‑worth segment.”