BOJ-inspired ETFs for big-spending Japan firms struggle to get investors

Tue Jul 5, 2016 7:09pm EDT
 
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By Tomo Uetake

TOKYO (Reuters) - Japanese asset managers answered the Bank of Japan's call to set up exchange traded funds comprising companies who invest in their staff and facilities. But investors have not been attracted to the ETFs, even though the central bank is helping them.

In late 2015, BOJ Japan Governor Haruhiko Kuroda called for creation of ETFs for firms "proactively making investment in physical and human capital".

The central bank, which already owns about half of all Japanese ETFs, pledged to buy about 300 billion yen ($2.94 billion) a year of the new type as part of enhanced stimulus moves.

Six such funds have been launched since May 19. But the response of institutional and retail investors has been subdued, with not many convinced of the merit of such investing.

If others don't put significant money into the ETFs, that could thwart the BOJ's plan to invest 300 billion yen annually, as rules bar the central bank from holding more than 50 percent of funds.

The BOJ is estimated to have bought 16.5 billion yen of such eligible ETFs in June, according to industry sources.

At the heart of investor coolness toward the ETFs is doubt higher investment translates to higher profits.

Buying companies on the basis they spend a lot "just doesn't work", said Seichiro Uchi, managing director for index compiler MSCI in Tokyo.   Continued...

 
A businessman walks past the Bank of Japan (BOJ) building in Tokyo, Japan, June 16, 2016. REUTERS/Thomas Peter