Japanese Onshore Mutual Funds Universe Update

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.