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Japanese Onshore Mutual Funds Universe Update

Be prepared for the upcoming boom in Japanese onshore mutual funds. This update clarifies the underlying trends in the expansion of net assets in Japanese onshore equities investment trusts.

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Japanese Onshore Mutual Funds Universe Update

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  1. Japanese Onshore Mutual Funds Universe Update Be prepared : the boom is still ahead and will take by surprise most observers, global financial intelligence providers cannot ignore the Trend.

  2. Introduction • The net assets of Japanese onshore equities investment trust universe continue expansion at fast pace. • However expansion pace differs according to asset class. This update aims at clarifying underlying trends. • Pascal Jeannenot : Japanese onshore investment trust project manager

  3. Bullet points • By September 05 end the net asset balance of public equity investment trusts reached $ 302 billion 943 million (\ 34 trillion 838 billion) , a level not reached since may 2001. • Japanese individual money continuous inflows support the regular increase of assets. This update gives a brief outlook of the universe by asset class type. • However the weight of onshore equities investment trust on Japanese stock market is still limited, why ? • Brief outlook of the trend in equities investment trusts and forecast of the institutional holdings growing impact on Japanese stock market. The boom has just started and is still ahead of us.

  4. Topic One • According to TSE net buying by domestic investors increased substantially from march to June. Equities investment trusts were the main engine. • Although the repartition of asset class within ‘equity investment trusts ‘ needs clarification. • There is ample margin for fund inflows to shift on pure equity side..

  5. Topic Two • Above right is the detailed trend of assets class distribution within ‘equity investment trust’ type. Pure equities investment still one third of total. • Above left chart is the detailed ventilation of total foreign assets (by zone and asset class type) held by public investment trust by the end of September 05 (total $ 152794 Million ) . You shall notice that bond weight is still overwhelming when Japanese invest overseas. China and newcomer India as exceptions… • Pure domestic bond investment trust are excluded from this update.

  6. Topic Three • Although net buying by onshore equities investment trust powered ahead from march to June 05, equity investment trust were net sellers for three months in a row from June to September. Investment trust sold net \ 95 billion stocks meanwhile Foreigners bought net \ 1 trillion 500 billion stocks . • So is the influence of onshore investment trust slowing down again ? For the real expert answer is no as within the total net assets universe a ‘hard core’ latent investment force exist. • In fact without even considering new buying in equities there is a reason why the net assets of the universe has grown to a 14 years high as global fixed rate investment trust such as Kokusai ‘Global sovereign Open’ reached \ 4 trillion NAV alone and those are classified as ‘equity investment trust’ by the Japanese association of Investment trust. In fact pure Japanese equities focused investment trust only represent 18% of the current total \ 35 trillion ($ 303 billion). Adding the Index trackers this figure rise to 31 % of total, still no more than one third of total. This is due to the wounds left from past decade to Japanese individual investors but the trend has reversed for good.

  7. What This Means • The ‘hard core’ equities investment trust universe has therefore kept intact its huge growth potential. This mean the boom is still ahead. Such ‘hard core’ investment potential will gradually expand thanks to new key products currently popular among Japanese individual investors like high yield equities investment trusts (Japanese and foreign equities alike) with comparatively good performances that meet Japanese individuals requirements. • In short, although still limited by sheer size, Japanese pure equity onshore equity investment trust universe will expand faster than anyone can forecast. Inflow of Japanese individual savings is regular and massive since payoff termination in may 2005.Post Office privatization should accelerate underlying trend.

  8. Next Steps • Action is needed for a serious full coverage of the universe. Not only to support demanding Japanese onshore business but to prepare for global requests on sell side. • According to worldwide mutual funds association Japan was standing only 9th position in 2004 Q4 (by NAV ranking). Such ranking will change.

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