Japan’s asset management industry is undergoing a gradual but structural shift driven by retail demand for low-cost passive funds, which now represent more than one-third of the fund market, according to a new report from Morningstar.
Passive and index funds now account for about 37% of Japan’s fund market, up from roughly 10% in 2015, Morningstar says in the report on December 19.
It attributes the growth to retail investors seeking lower fees, wider online distribution, and policy support for long-term investing in the form of the expanded Nippon Individual Savings Account (NISA) programme.
The programmes’ tax incentives were made permanent last year and contribution limits were raised. The report says the overhaul is playing a central role in the growth of passive funds by attracting a growing share of household savings.
Morningstar estimates that NISA-related investments now account for around 30% of gross retail inflows, largely into low-cost passive products.
Despite the rapid expansion of passive investing, the assets are highly concentrated among a small clutch of asset management firms.
According to the report, the top three asset managers control around 76% of passive assets, whereas the top five account for 43% of active fund assets.
The top five asset managers are Nomura Asset Management, Amova Asset Management, Daiwa Asset Management, Mitsubishi UFG Asset Management and BlackRock Inc.
