LY Corporation shuts down PayPay Asset Management
As initially announced in October 2024, PayPay Asset Management, a joint venture between LINE Yahoo and a subsidiary of Mizuho Financial Group, will cease operations in September 2025. LINE Yahoo's inability to tolerate ongoing losses was the primary driver of this decision. The abrupt closure of an asset management firm, a business inherently focused on long-term investment, is highly unusual and has sparked criticism from investors concerned about the company's fiduciary responsibilities.
The closure was initiated by the former Yahoo, which approached Mizuho about shuttering PayPay Asset Management in the summer of 2023, just one year after Asset Management One, a Mizuho FG subsidiary, acquired a 49.9% stake in the venture. This sudden shift caused considerable turmoil within Mizuho.
One contributing factor was a change in leadership. The former LINE and Yahoo merged to form the current LINE Yahoo in October 2023. As the newly merged entity sought to improve its financial performance, PayPay Asset Management, with five consecutive years of losses, became a prime candidate for restructuring. Its assets under management had also declined to approximately ¥190 billion, down from roughly ¥320 billion in September 2020.
Mizuho executives argued that asset management requires a long-term perspective, clashing with LINE Yahoo’s new management team’s focus on streamlining operations. Mizuho's five-year growth plan for PayPay Asset Management was abruptly abandoned.
This marks the second joint venture between LINE and Mizuho to be dissolved, following the cancellation of "LINE Bank" in 2023. However, unlike the bank, which never launched, this closure directly impacts investors. Depending on the final net asset value, investors might incur losses.
Concerned, Japan's Financial Services Agency (FSA) urged a reconsideration of the initial plan to liquidate eight publicly offered investment trusts. Some of these trusts were eligible for the new NISA tax-advantaged investment program, and the FSA was keen to avoid disrupting novice investors.
A compromise was reached, and updates provided to investors on January 8: four trusts will be liquidated, while the remaining four will be transferred to Asset Management One. Although this transfer burdens Asset Management One with the added cost of managing smaller funds with little benefit, it was deemed necessary to protect investors.
Privately offered funds for institutional investors, however, will all be liquidated, leading to outrage and accusations of irresponsibility from affected regional banks.
Initially established in 2004 as Astmax Investment Management, PayPay Asset Management focused on private funds for institutional investors. Following its acquisition by Yahoo in 2019, it shifted its focus to individual investors, adopting a digital-first strategy.
Despite attracting many investors with near-zero fees, it failed to gain significant market share against competitors like Mitsubishi UFJ Asset Management. The tech-driven focus on rapid profitability clashed with the long-term commitment inherent in asset management, ultimately harming customers.
In contrast, Rakuten Investment Management, under the Rakuten Group, has successfully leveraged low fees to expand its public fund assets and maintain profitability. PayPay Asset Management's failure underscores the consequences of inadequate foresight.
This closure comes as LINE Yahoo rapidly expands its financial services, including payments, banking, and insurance. Recent reversals, such as reinstating acceptance of other credit cards on PayPay after user backlash, highlight the increasing need for cautious decision-making as the company grows and its influence within the financial sector expands.
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