TOKYO, April 4 (Reuters) - A global bond fund of Japan’s Kokusai Asset Management, which has reigned as the top mutual fund in the country for more than 12 years, was knocked from the position by Fidelity’s U.S. high-yield fund as investors become more enthusiastic about chasing higher returns.
Kokusai’s flagship bond mutual fund, called Global Sovereign Open, was once a symbol for cash-rich Japanese households’ appetite for foreign assets, but it has suffered consistent outflows since the financial crisis triggered by the failure of Lehman Brothers in 2008.
Japanese investors could be more eager about taking risks in as sentiment towards domestic shares improved following Prime Minister Shinzo Abe’s aggressive reflationary and monetary measures, fund analysts said.
As of Thursday, the asset value of Kokusai’s Global Sovereign fund was 1.195 trillion yen ($11.50 billion), only about a fifth of a peak of 5.7 trillion yen in 2008.
The Global Sovereign fund, which has been the top fund since January 2002, is an actively managed mutual fund that invests in global government and agency bonds with high credit ratings of higher than a single A-minus rating.
Fidelity’s U.S. High Yield Fund has been drawing huge inflows over the past year, with the asset value reaching 1.212 trillion yen ($11.67 billion).
Tokyo-based Shinko Asset Management’s U.S. REIT Open fund, managed by U.S.-based Invesco, was also quickly catching up, with its asset size rising to 1.161 trillion yen.
The Japanese mutual fund market grew by a record amount in 2013 as strong global equity prices and a weaker yen spurred healthy inflows in domestic and U.S. funds.
Domestic retail investors remain keen about taking exposure to Japanese stocks and U.S. assets this year due to prospects of bright economic prospects in the United States, analysts said.
Still, outflows from Global Sovereign accelerated since the start of the year after the fund lowered its monthly dividend payments to investors, said Shoko Shinoda, a fund analyst at Rakuten Securities Economic Research Institute.
“Low yield condition in developed countries in recent years was a key factor to hurt demand for the Global Sovereign fund,” Shinoda said.
“It suffered a serious blow after it reduced monthly dividends in January,” she said. ($1 = 103.8900 Japanese Yen) (Reporting by Chikafumi Hodo; Editing by Kim Coghill)