Nomura AM to launch Japan’s first active ETFs

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Nomura Asset Management has been granted approval by the Tokyo Stock Exchange to list the first two actively managed exchange traded funds in Japan.

The Next Funds Japan Growth Equity Active Exchange Traded Fund and the Next Funds Japan High Dividend Equity Active Exchange Traded Fund are scheduled to start trading on the Tokyo bourse on September 7.

A minimum investment of around ¥2,000 per unit ($13.68) will be required for the two ETFs, which will apply respective annual management fees of 0.6875 per cent and 0.5225 per cent.

The Japan Growth Active ETF evaluates a company’s business model, management strategy and financial strategy based on research and analysis of individual companies.

The vehicle, which carries the code 2083, invests mainly in equities that are expected to achieve a high return in the medium to long term.

The Japan High Dividend Active ETF, meanwhile, is designed to achieve medium to long-term total returns by capturing stable dividends, or income gains, and flexible gains in stock prices, or capital gains. The product has the code 2084.

Tokyo Stock Exchange announced on June 30 that it had opened applications for domestic and foreign asset managers to list active ETFs in Japan. They have already taken off outside Japan, particularly in the US.

Under Japan’s listing rules for active ETFs, the products will be subject to daily disclosures and inverse active funds will not be permitted.

Yamaji Hiromi, chief executive of JPX Group, said the rules ensured all listed active ETFs were marketable or easy for investors to understand and transparent by providing proper disclosures of each fund’s holdings and other information.

“We sincerely hope that many management companies, both in Japan and overseas, will enter the market,” he said.

Nomura AM applied for the listing of its first two active ETFs in Japan on June 30.

In its statement announcing the launch of Japan’s first two active ETFs, Nomura AM cited data from ETF consultancy ETFGI stating that the number of active ETFs outside Japan amounted to 2,075 vehicles managing combined assets of around $583bn as of the end of June.

“Similar growth is expected in Japan,” said Nomura.

“The introduction of actively managed ETFs will provide investors with more investment options at a time when the Nisa scheme is scheduled to be expanded and perpetuated, and the trend from savings to asset formation is accelerating,” Nomura AM said.

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Nisa, which stands for Nippon Individual Savings Account, is a tax exemption programme for small individual investments that was first launched in Japan in early 2014. It is about to be expanded and become a more effective, easier-to-use tool to support asset building by individual investors in the country, while facilitating asset transfers from older to younger generations.

Masahiro Hotchi, ETF business development manager at Daiwa Asset Management, told Ignites Asia last year that he expected the first active ETFs in Japan to be met with a “quiet” response.

Active ETFs will be hampered by the fact that, unlike mutual funds, ETFs do not have a subscription period during which firms can attract investors, so the first promotion happens only after an ETF is listed, he said.

Hotchi added that he expected active ETFs to “grow gradually” with “very big” potential.

Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.