In 2022, Russia’s invasion of Ukraine triggered rapid inflation due to soaring costs for energy, food, and other commodities and leading to a series of interest rate hikes and global monetary tightening. How did Japan’s toshin (investment funds) market perform in such a rough market environment? Based on data provided by Mitsubishi Asset Brains Co., Ltd. (MAB), we review the toshin market in 2022 and explore funds to watch in the future.
Translated from an article originally published in Ma-Do magazine vol. 69, February 2023.

 

The net asset balance of toshin funds* at the end of 2022 was JPY 63.95 trillion, down about JPY 5 trillion from the same time in 2021.  As interest rates rise due to global monetary tightening, bond prices have fallen, and bond funds and balanced funds have struggled.  Monetary tightening, particularly in the US, caused steep declines in stock and REIT prices, which in turn affected base prices of toshin funds.  Foreign equity funds, which have led the toshin market, also suffered overall weakness due to the decline in growth stocks, especially high-tech stocks.

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

Nevertheless, cash inflows to the toshin market have remained fairly stable even in the turbulent market environment, which may indicate that a "long-term, accumulative, and diversified” investment policy is gaining ground among individual investors.  In 2022, toshin market saw a net positive inflow of JPY 6.588 trillion, marking the third consecutive year of inflows.  Among fund types/categories, foreign stock funds brought inflows of JPY 4.194 trillion, multi-asset funds attracted JPY 655.1 billion, and domestic stock funds drew JPY 650.5 billion, in that order.  Although active foreign stock funds suffered notable outflows due to deteriorating performance, inflows into Tsumitate NISA**-eligible index funds continue unabated.  It is highly likely that inflows into index funds will continue in 2023.

** Nippon Individual Savings Account, accumulative/installment-type, a tax-free investment available to individual investors in Japan

 

TOP 10 BEST-SELLING FUNDS (2022)

  Fund Name Provider Date of Launch

Inflow Amount
(million yen)

1.

eMAXIS Slim US Equity S&P500

MUFG AM

July 3, 2018

736,444

2.

AllianceBernstein US Growth Stock Fund D Course (monthly settlement, unhedged, projected dividend)

Alliance
Bernstein

Sep. 16, 2014

456, 344

3.

eMAXIS Slim All World Equity (All Countries)

MUFG AM

Oct. 31, 2018

414,776

4.

Rakuten US Equity Index Mother Fund

Rakuten

Sep. 29, 2017

295,817

5.

SBI・Vanguard・S&P500 Index Fund

SBI Sep. 26, 2019 290,145
6.

AllianceBernstein US Growth Stock Fund B Course (unhedged)

Alliance
Bernstein

May 25, 2006

205,775

7.

Invesco Global Select Equity Open (monthly settlement, unhedged)

Invesco

Jan. 7, 1999

174,237

8.

Fundsmith Global Equity Fund

AM One

Dec. 22, 2021

158, 311

9.

Fidelity Global Undervalued Growth Equity Fund B Course (unhedged)

Fidelity

Mar. 23, 2020

152,534

10.

Daiwa J-REIT Open (monthly dividend)

Daiwa

May 18, 2004

151,166

Inflows into foreign equity funds were lower in 2022 than 2021 but were still the second largest net positive on record, exceeding JPY 3 trillion for the third consecutive year.  Among individual funds, nine of the top ten inflow recipients in 2022 were foreign equity funds.  The highest inflow in 2022, approximately JPY 736.4 billion, went to a low-cost foreign stock index fund, eMAXIS Slim US Equity (S&P 500).  Although the one-year return was -6.09%, the high level of inflows continued and its net asset balance was JPY 1.598 trillion by December 31, 2022.  The fund will likely continue to see high inflow in 2023, as buyers continue to seek the benefits of Tsumitate NISA, mainly through online securities platforms.

 

TOP 10 OUTFLOW FUNDS (2022)

  Fund Name Provider Date of Launch

Outflow Amount
(million yen)

1.

Global ESG High Quality Growth Equity (unhedged)

AM One

Jul. 20, 2020

-93.536

2.

TokioMarine Yen Asset Balance Fund (monthly settlement)

TokioMarine

Nov. 9, 2012

-70.136

3.

Global Prospective Fund

Nikko AM

Jun. 28, 2019

-69.049

4.

Innovative Carbon Neutral Strategy Fund

SMD-AM

Mar. 30, 2021

-65.241

5.

Global High Quality Growth Equity Fund (unhedged)

AM One

Sep. 30, 2016

-60.531

6.

Next Generation Communication Global Equity Strategy Fund

SMTAM

Dec. 15, 2017

-57.614

7.

GS Future Technology Leaders B Course (unhedged)

GS

Feb. 25, 2020

-54.518

8.

AllianceBernstein US Growth Stock Fund C Course (monthly settlement, hedged, projected dividend)

Alliance
Bernstein

Sep. 16, 2014

-43.112

9.

T. Rowe Price US Growth Stock Fund

T. Rowe Price

Dec. 27, 2019

-42.102

10.

Tetra Equity

SMD-AM

Nov. 6, 2019

-33.942

Emerging bond (JPY 133.2 billion) and emerging equity-type (JPY 85.8 billion) funds were the only toshin categories to suffer outflows.  However, among individual funds, the largest outflows occurred in active foreign stock funds that invest in stocks of developed countries, mainly the US.  The largest decrease in net asset balance was in the Global ESG High Quality Growth Equity Fund (unhedged), which declined approximately JPY 93.5 billion, due to its poor annual return of -27.94% and continued monthly outflows.  The fund held a net asset balance near JPY 1,155 billion at the end of 2021, the second largest toshin fund, that fell to approximately JPY 750 billion a year later, placing it fifth.

 

TOP 10 FUNDS OF NET ASSET BALANCE (2022)

  Fund Name Provider Date of Launch

N. A. Balance
(million yen)

1.

AllianceBernstein US Growth Stock Fund D Course (monthly settlement, unhedged, projected dividend)

Alliance
Bernstein

Sep. 16, 2014

1,667.020

2.

eMAXIS Slim US Equity S&P 500

MUFG AM

July 3, 2018

1,598.017

3.

Pictet Global Income Equity Fund (monthly dividend)

Pictet

Feb. 28, 2005

1,039.920

4.

eMAXIS Slim All World Equity (All Countries)

MUFG AM

Oct. 31, 2018

776.361

5.

Global ESG High Quality Growth Equity Fund (unhedged)

AM One

Jul. 20, 2020

750.042

6.

Rakuten US Equity Index Mother Fund

Rakuten

Sep. 29, 2017

717.868

7.

SBI・Vanguard・S&P500 Index Fund

SBI

Sep. 26, 2019

710.199

8.

Daiwa US-REIT Open (monthly dividend) B Course (unhedged)      

Daiwa

Jul. 21, 2004

649.219

9.

AllianceBernstein US Growth Stock Fund B Course (unhedged)

Alliance
Bernstein

May 25, 2006

647.482

10.

Fidelity US REIT Fund B (unhedged)

Fidelity

Dec. 3, 2003

637.913

The top fund in net assets at the end of 2022 was AllianceBernstein US Growth Stock Fund D Course (monthly settlement, unhedged, projected dividend).  Inflow to the fund slowed in 2022, however, to JPY 456.3 billion from JPY 939.4 billion, the top inflow of 2021.  The fund’s annual return was -18.68%, and the net asset balance declined from nearly JPY 1,737 billion in 2021 to JPY 1,667 billion in 2022.  Its lead over the second highest asset holder, eMAXIS Slim US Equity S&P 500, has narrowed.  If US growth stocks continue to soften, the eMAXIS Slim US Equity S&P 500 fund is likely to overtake the AllianceBernstein US Growth Stock Fund D Course.