Translated from an article originally published in Ma-Do Magazine Vol. 60, November 2020.

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

Cash flows for openly-sold funds* in October 2020 were a net positive of JPY 69 billion.  The toshin market has been positive for all of 2020 except June and, like the Japanese stock market, continues to rise even as the real economy is stalled by COVID-19. 

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

The inflow was driven by foreign stock funds, solidifying a trend that began in July.  In October, all but a few categories suffered outflows, with "foreign equity" (up JPY 318 billion) and "other" (up JPY 17 billion) the exception.  Domestic stock funds have been particularly hard hit, losing more than JPY 100 billion since June.

Atsushi Ohno, Chief Fund Analyst at MAB, find the difference between foreign and domestic stock funds worrisome. “Domestic stock funds have performed well in the last 6 months.  Many grew more than 30%, and some grew more than 50%.  Yet despite the laudable stewardship of fund managers, most funds suffered outflows.”  The same can be seen in other categories.  Domestic stock funds seem to have fallen into a vicious cycle in which good performance leads to profit-taking.

The overall tendency is evident in the ranking of best-selling funds.  Nine of the 10 top-selling funds are comprised of foreign stocks.  The top-selling Global ESG High Quality Growth Stock Fund (unhedged), launched in July with an initial setup of JPY 383 billion, maintained steady inflows reaching AUM of JPY 658 at the end of October.  It is the second largest fund in Japan after Pictet Global Income Equity Funds (monthly dividend).

The 2nd best seller is Digital Transformation Stock Fund, which also launched in July.  Notably, eMAXIS Slim US Equity S&P 500 remains in the 10 at 9th place.  The eMAXIS Slim series, mainly sold on web channels, remained the top sellers among online securities firms, due to the strong performance of US stocks.  Also available as accumulation products, the series is indicative of how the toshin business has changed in recent years.

 

TOP 10 BEST-SELLING FUNDS (October 2020)

 

Fund name

Provider Inflow amount (million yen)
1.

Global ESG High Quality Growth Fund, JPY unhedged

AM One 68,048
2. Digital Transformation Stock Fund Nikko AM 61,326
3. Tetra Equity SMD-AM 44,158
4. AllianceBernstein US Growth Stock Fund D Course (monthly dividend), JPY unhedged AllianceBernstein 38,543
5. Sommelier for Investment AM One 23,617
6. AllianceBernstein US Growth Stock Fund C Course (monthly dividend), JPY hedged AllianceBernstein 22,279
7. Nomura Environment Leaders Strategy Fund, JPY hedged Nomura AM 19,807
8. Nomura Environment Leaders Strategy Fund, JPY unhedged Nomura AM 19,713
9. eMAXIS Slim US Equity S&P 500 MUFG AM 14,255
10. auAM Future City Related Stock Fund, JPY unhedged au AM 13,198

The 7th and 8th best selling funds, launched in October, are Nomura Environment Leaders Strategy Fund A Course (currency hedged) and B Course (currency unhedged).  Both are ESG-related funds that apply ESG analysis techniques to select stocks.

“ESG-aligned funds are more and more prominent among newly launched funds,” said Yohei Shimegi, Fund Analyst at MAB.  “The trend seems to stem from the success of Global ESG High Quality Growth Stock Fund, which leads some to see ESG as an emerging theme.  However, ESG is a much broader concept and is based on long-term investment.  I would be wary of looking for any theme for a while.”

Among toshin, foreign stock funds - primarily US stocks - are surging.  Low-cost index funds are an increasing presence and ESG-related funds continue to gain acceptance.  These trends have become more pronounced in the last several months and absent a drastic change, they will  likely continue a while longer.

 

 

< Toshiaki Kikuchi >