European investors committed some €1.4bn to Japanese equities in February, with the bulk of this money being invested in index trackers. It was the first month since July 2015 when net inflows exceeded the €1bn mark.
The uptick in interest comes as the Topix index has proved resilient in spite of a strong yen. Despite the yen gaining almost 8% against the dollar over the past two years, the benchmark Japanese equity index is still up slightly over that period.
The renewed strength of the yen has coincided with a decreasing appetite to hedge currency risk for the asset class, which was common practice among European investors until a couple of years ago. But investors have been preferring unhedged exposure to Japanese equities for the past two years.
Absolute return on the up
Meanwhile, multi-asset and long/short absolute return funds have seen an acceleration in inflows at the start of the year. Apparently, investors are looking for a parachute as equity markets have continued their rise while fixed income volatility edged up too. Both categories saw the highest monthly inflows since the summer of 2015.
