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)

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)

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)

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.