- BRL (FX) overlay Toshin funds have regained traction and are seeing inflows from Japanese retail investors after the sell-off during September. This suggests that Japanese retail investor appetite for yield and asset diversification remains intact.
- AUD overall Toshin funds have become more popular among Japanese retail investors in recent months and this could continue given AUD’s relatively high yield among G10 peers and solid fundamentals. These factors are likely to appeal to investors during the current period of global market uncertainty; ie, AUD offers yield pick-up (over JPY) but at the same time is a less aggressive carry-trade than higher beta EM currencies. Regulatory risks and an already large exposure by Japanese retail investors to BRL might have been additional factors, motivating a relative shift away from BRL to AUD.
- TRY has been receiving more inflows in recent months. This could also be the consequence of Japanese retail investors looking for alternative investment destinations. That said, the absolute amount of TRY overlay Toshin funds is still rather small (USD1.5bn assets under management).
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FOREIGN EXCHANGE RESEARCH