Mitsubishi launches Japan Proactive Investment ETF on Tokyo exchange

Jul 1st, 2016 | By | Category: Equities

Japanese asset manager Mitsubishi UFJ Kokusai AM has launched an exchange-traded fund tracking the iSTOXX MUTB Japan Proactive Leaders 200 Index. The MAXIS JAPAN Proactive Investment in Physical and Human Capital 200 Index ETF launched earlier this week and is listed on the Tokyo Stock Exchange.

Stoxx licenses Japan quality equity index to Mitsubishi to underlie new ETF

The iStoxx MUTB Japan Proactive Leaders 200 Index tracks quality companies which actively reinvest in their physical and human capital.

Index provider STOXX announced that it had licensed its index to the asset manager to underlie the ETF earlier this year. The index was developed as part of a collaboration between STOXX and Japanese trust bank Mitsubishi UFJ Trust. Mitsubishi UFJ Trust and Mitsubishi UFJ Kokusai Asset Management are both part of the Mitsubishi UFJ Financial Group, Japan’s largest financial group and the world’s second largest bank holding company.

Matteo Andreetto, Chief Executive Officer at Stoxx, said: “The iSTOXX MUTB Japan Proactive Leaders 200 Index offers a unique opportunity to track the performance of leading Japanese companies in terms of overall quality and stability of their businesses but also reinvestment in physical and human capital. By investing into long-term business development and their employees, these companies demonstrate a forward-looking approach.”

Derived from the STOXX Japan 600 Index, the index’s methodology selects the best companies based on a combined ranking of four fundamental indicators (high profitability, low leverage, cash flow generation ability and business stability) and two capital investment factors (physical and human). The physical capital investment factor is calculated from an average score across three pillars: the change in capital expenditures, capex-depreciation, and research and development. The human capital investment factor is calculated from scores across five key pillars: the turnover in employees, the change in average wage, the working environment/system, the firm’s skill and motivation program, and programs to empower women in the workplace.

The top ranked 200 stocks based on the selection criteria are eligible for inclusion in the index and weighted by free-float market cap, with a 2% cap for individual components. The index is reviewed and re-balanced semi-annually in June and December. It is available in euro-, yen- and US dollar-calculations.

Hideo Shirota, Director at Mitsubishi UFJ Kokusai Asset Management, said: “In December last year, the Bank of Japan (BOJ), as part of their quantitative and qualitative easing enhancement measures, announced that they will support domestic firms that are proactively making investments in physical and human capital. The BOJ decided to put aside 300bn yen yearly to purchase ETFs that comprise of such companies. This index received BOJ approval on 10 June, and as a result allows this ETF to be one of the BOJ’s investment vehicles.

“As for the concept of this index, in which companies are included that have stable and high profitability, focus is put on companies that proactively invest towards creating future growth, and thus can be expected to provide good performance as well. I feel that it will receive wide spread attention from both retail and institutional investors.”

As of 1 July 2016 the fund’s index, when calculated in yen, is down 15.4% year-to-date (YTD) and 20.0% over the past year. In contrast the STOXX Japan 600 Index is down 18.5% YTD and 23.0% over the past year.

The ETF has a total expense ratio (TER) of 0.22%.

While the iStoxx MUTB Japan Proactive Leaders 200 Index isn’t yet available to UK/European investors in an ETF wrapper, it will likely gain the attention of ETF product developers in response to investor demand for smarter ways to invest in Japanese stocks. One such index that offers a smarter approach to Japanese equities is the JPX-Nikkei 400 Index, which focuses on companies with the ability to generate shareholder value. This index was launched in January 2014 and has been widely embraced by investors and spawned a number of hugely successful ETFs. Among these are the Source JPX-Nikkei 400 UCITS ETF (LSE: N400), with over $260m in assets under management (AUM) and a TER of 0.25%; and the db x-trackers JPX-Nikkei 400 UCITS ETF (LSE: XDNU), with over $120m in AUM and a TER of 0.30%. The largest UCITS fund to track the index however is the Lyxor JPX-Nikkei 400 UCITS ETF (LSE: JPX4), with over $770m in AUM and a TER of 0.25%.

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