Translated from an article originally published in Ma-Do magazine vol. 58, May 2020.

Investment Japan will report quarterly on Japan’s toshin (investment funds) market, based on data provided by the Mitsubishi Asset Brains Co., Ltd. (MAB). Data referenced in this report is current as of April 2020.

 

 

Cash flows for openly-sold funds* in April 2020 were a net positive of JPY 80 billion.  Although April’s figure declined sharply from March’s JPY 470 billion net positive, the market managed to retain the positive balance established over the 4 previous months.  Despite banks and securities houses suspending face-to-face sales due to COVID-19, Japanese individual investors were still willing to invest.

* Publicly offered investment funds excluding ETF, defined contribution-only, separately managed account-only, and bond investment trusts.

Domestic stock funds saw outflows, but foreign stock funds maintained the inflow momentum established at the beginning of 2020.  Inflows to REITs seemed a contrarian move after sharp price drops in March.  On the other hand, bond funds of all types experienced outflows.

It’s worth noting that multi-asset funds suffered outflows for the first time since December 2016.  “Those were the days of the so-called ‘Trump rally’ when stock prices were hitting record highs almost daily.  The multi-asset funds were sold for profit-taking.  Now, however, we’re seeing notable outflows from low-risk balanced funds, which means investors with less risk-tolerance sold them because of a dip in the funds’ performance,” said Yohei Shimegi, Fund Analyst at MAB.

Several balanced funds appear below in the list of funds experiencing the ten largest outflows: Amundi Double Watch Fund, which was redeemed in advance on April 30; SMBC Amundi Protect & Switch Fund; and Tokio Marine Yen Asset Balance Fund (monthly dividend), which previously led the multi-asset market.  These funds had suffered relatively little damage from the coronavirus’s effect on the market, yet they were unable to recover when the market rebounded.

 

TOP 10 OUTFLOW FUNDS (April 2020)

  Fund name Provider

Inflow amount
(million yen)

1. Amundi Double Watch Amundi -46,778
2. SMBC Amundi Protect & Switch Fund Amundi -20,155
3.

Global All Organisms Genome Equity Fund (annual dividend)

Nikko AM -6,770
4.

Japan Equity Alpha Quartet (monthly dividend)

SMDAM -5,153
5. Pictet Gold Fund, JPY hedged Pictet -5,115
6. Living Earth Strategy Fund (semi-annual dividend) T&D -4,994
7. Tokio Marine Yen Asset Balance Fund (monthly dividend) TokioMarine -4,933
8. Chinese Yuan Sovereign Open Fund Okasan -4,731
9. BlackRock Gold Metal Open A Course BlackRock -4,300
10. Nikkei 225 No-load Open AM One -4,137

Foreign stock funds made the best-selling list: T. Rowe Price US Growth Stock Fund was the best-seller; second best was Pictet Global Income Equity Fund (monthly dividend); and most notably, UBS Crude Oil Futures Fund was third on expectations of a rebound from the plunge in crude oil futures and negative prices in New York.

 

TOP 10 BEST-SELLING FUNDS (April 2020)

  Fund name Provider

Inflow amount
(million yen)

1. T. Rowe Price US Growth Stock Fund  T. Rowe Price 14,901
2. Pictet Global Income Equity Fund (monthly dividend) Pictet 11,478
3. UBS Clude Oil Futures Fund UBS 11,355
4. eMAXIS Slim Equity S&P 500 MUKAM 11,116
5. neWIN GS Technology Equity Fund B Course, JPY unhedged GS 10,640
6. Daiwa J-REIT Open (monthly dividend) Daiwa 9,414
7. Global Prospective Fund Nikko AM 9,225
8. J-REIT Research Open (monthly dividend) SMTAM 8,843
9. Next Generation Connectivity Fund SMTAM 8,268
10. Daiwa US-REIT Open (monthly dividend) B Course, JPY unhedged Daiwa 6,954

Experienced investors seemed to buy these funds.  Atsushi Ohno, MAB’s Chief Fund Analyst, noted that “experienced investors regarded the market plunge as an opportunity to invest.  They were mostly customers of securities houses.  Judging from cash flows by category, the toshin market saw cash flows across the board, from investment beginners (multi-assets funds) to experienced investors (foreign stock funds).”

Expanding the pool of investors, a longtime goal of the toshin market, has been achieved to some extent as systems like NISA were improved.  However, the coronavirus shock may scare off some neophyte investors, which would be a serious blow to asset management in Japan.

First-time investors were guided toward low-risk balanced funds as entry products.  The more risk averse the investor, the more unlikely they’ll invest again after suffering a loss.  From now on, toshin retailers will need to explain to beginning investors the importance of diversification not only in asset allocation but also in time, such as accumulated investments.

 

 

< Toshiaki Kikuchi >