Cash flows for openly-sold toshin funds* were a net positive for 2020 of JPY 1.945 trillion.  Inflow was driven by foreign stock funds, which ended the year with a net positive of JPY 3.7023 trillion.  REIT funds, the next most successful category, attracted only JPY 332.8 billion inflow.  Clearly, foreign stock funds were the toshin market’s main support in 2020.

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

Domestic stock funds, on the other hand, suffered a net negative of JPY 1.3473 trillion in 2020, the second year in a row for outflows greater than JPY 1 trillion.  Domestic stock funds provided the best returns among toshin, solidifying the trend of selling on price increases.  According to Atsushi Ohno, Chief Fund Analyst at MAB, “It seems that many investors see Japan’s potential growth as limited in the long term.  Even if true in the aggregate, certain individual companies continue to grow.  By selecting and investing in such companies, active fund managers can show their skills.  Several funds substantially outperformed benchmarks last year, even while experiencing cash outflows, which presents a major challenge for the asset management industry.”

The best-selling funds in 2020 were Global ESG High Quality Growth Stock Fund (unhedged) with an initial setup of JPY 383 billion, followed by Digital Transformation Stock Fund, and AllianceBernstein US Growth Stock Fund D Course (monthly dividend, unhedged).  All three of the top selling toshin are foreign stock funds.

TOP 10 BEST-SELLING FUNDS (2020 in total)

In January of 2021, cash flow for openly-sold funds were a net positive of JPY 453 billion.  This inflow was also driven by foreign stock funds while domestic stock funds once again ended with a net negative.  These trends have held since July 2020, with some fluctuation in the levels.

January’s top-selling fund was Digital Transformation Stock Fund, which was also the second-best seller annually for 2020.  January’s second-best seller was Global Prospective Fund, another foreign stock fund.  2020’s top seller, Global ESG High Quality Growth Stock Fund (unhedged), ranked third for January.  Only the fourth-best seller, Sommelier for Investment, was a multi-asset fund.  The remaining nine funds in January’s top 10 were foreign stock funds, indicating a significant bias.

Among January 2021’s top ten, relatively orthodox funds like AllianceBernstein US Growth Stock Fund Series and long-term oriented funds like AllianceBernstein Global SDGs Equity Fund (asset growth type) stick out.

TOP 10 BEST-SELLING FUNDS (January 2021)

“Last year was the first to see ESG investment in earnest in Japan.  This year could see such investments take root and expand,” said Yohei Shimegi, Fund Analyst at MAB.  “I see signs of the investor base expanding.  There is stable cash inflow to ESG funds such as eMAXIS Slim US Equity S&P 500 and ESG-aligned installment-type NISA (Nippon Individual Savings Account) funds.  The number of investors who continue to invest in installment-type funds in the wake of COVID-19 disruption is steadily increasing.”

Although the inflow bias toward foreign funds is a concern, there are positive factors.  We may see healthy growth in the toshin market become steadier in 2021.

< Toshiaki Kikuchi >