Asset Management One International (AMOI), which is part of Asset Management One Co., Ltd has launched an actively managed Japanese fixed income fund, widely available in the UK and Continental Europe.
The firm writes that over the last two decades, interest rates in Japan had been extremely low, and occasionally even negative, until the Bank of Japan started normalising interest rates in 2024.
“As a result, investors in the UK and Continental Europe were showing very little interest in the asset class, and most funds offering exposure to Japan’s fixed income were discontinued. Recognising the recovering investor interest in Japanese bonds, AMOI has launched a new fund that provides an attractive investment option for investors in this asset class.”
The Japan Government Bond Plus UCITS fund, will invest in Japanese government bonds (JGBs), and aims to generate additional returns through opportunistically investing in Japanese corporate bonds (a maximum of 30 per cent of the fund).
The fund will aim to deliver 80 basis points (before fees) above the relevant Japanese government bond index (Bloomberg Global Treasury: Japan Bond Index). Sources of excess returns will include:
Adjusting interest rate positioning (duration) based on the expected movements in the yield curve
Credit allocation (up to 30 per cent) – adjusting the weighting between JGBs and corporate bonds depending on whether spreads between the two are tightening or widening
Individual security selection, e.g. those bonds where spreads over JGBs are expected to tighten
Combining different sources of alpha in the asset class is an expertise Asset Management One prides itself in, managing around USD90 billion in Japanese fixed income strategies, including around USD25 billion in actively managed Japanese fixed income strategies.
The firm’s Japanese fixed income team is comprised of 28 investment professionals, including portfolio managers and credit analysts, one of the largest in the industry.
Noriyuki Sugihara, CEO of AMO, says: “For international investors the Japanese bond market is looking increasingly attractive. Yields are the highest they have been in over a generation.”
“We’ve had a lot of interest from global investors who see Japanese bonds as a very important component of global fixed income. This fund will give those investors the edge by providing them an actively managed strategy built by one the biggest and most experienced Japanese bond teams that there is.”
Taketomo Shimizu, Co-Head of Fixed Income in AMO says: “Recent increases in Japanese bond yields have made JGBs much more attractive. Yields on 10-year JGBs have risen from -0.04 per cent in 2021 to 2.2 per cent.”
“For European investors who hedge their exposure to the yen, the returns may be even higher. Another attractive feature of JGBs is that their returns are relatively uncorrelated to those of government bonds in the UK, Germany and US, allowing them to be an effective diversifier”.
Oleg Kapinos, Head of Global Distribution Strategy ex Japan at AMOI, says: “The strategy combines a core allocation to Japanese government bonds with selective exposure to Japanese investment-grade corporate bonds, allowing the portfolio to enhance returns while maintaining a government bond foundation. We are happy to start offering this new fund to the European investors as it will enhance our Japan-specialised product offering by adding fixed income to the existing equity line-up”.
