A closer look at Japan's ETF performance in 2013

02 January 2014   Category: News, Asia, Japan   By Deborah Fuhr*

The stimulus package introduced by Japan's Prime Minister Shinzo Abe has helped to propel Japan, the world's third-largest economy, to end the last trading day of 2013 with the Nikkei 225 index closing at 16,291.31 points, recording an impressive 57% increase in 2013, marking the index's biggest annual gain since 1972.

Based on our [ETFGI’s] analysis of the ETF/ETP industry in Japan through the end of November 2013, it has seen a similar growth pattern with the assets under management (AUM) increasing by 56.7% from US$49 billion to US$77 billion. At the end of November 2013, the Japanese ETF/ETP industry had 128 ETFs/ETPs, with 166 listings, assets of US$77 billion, from 17 providers on three exchanges.

The compounded annual growth rate (CAGR) in AUM in the ETF/ETP industry in Japan over the previous ten years was just 8.9%. Just five years ago, at the end of 2008, the AUM in ETFs/ETPs in Japan was just US$28 billion.

Year-to-date through the end of November 2013, ETFs/ETPs in Japan had net inflows of US$14.7 billion, which was significantly above the US$9.7 billion of net inflows at the same time in 2012. The majority of the net inflows, US$13.5 billion, went into equity products.

The top 20 ETFs account for 97.7% of Japanese ETF assets. The largest ETF – the Nomura Nikkei 225 ETF – on its own accounts for 23.5% of assets. Nineteen of the top 20 ETFs track equity indices while one provides exposure to alternative asset class indices. Year-to-date through the end of November, the top 20 ETFs have collectively gathered US$14.6 billion in net new assets.

Nomura AM is the largest ETF/ETP provider in terms of assets with US$36 billion, reflecting 47.3% market share; Nikko AM is second with US$17 billion and 22.1% market share, followed by Daiwa with US$17 billion and 22% market share. The top three ETF/ETP providers, out of 17, account for 91.4% of Japanese ETF/ETP assets, while the remaining 14 providers each have less than 7% market share.

ETFs assets are also growing when compared to mutual fund assets in Japan. At the end of 2008, ETF assets accounted for approximately only 4% of mutual fund assets, having grown to 7.1% of mutual fund assets at the end of 1Q 2013.

Top 5 ETF/ETP providers in Japan as of end of Nov 2013

Source: www.ETFGI.com ETFGI, ETFG/ETP providers and Bloomberg.

*Deborah Fuhr 
is managing partner