(Bloomberg) -- SBI Global Asset Management Co. plans to target retail investors with two new mutual funds for Japanese government bonds, a rare launch that shows activity revving up as the central bank loosens its grip on yield control.
The money manager, which oversees about 4.7 trillion yen ($32 billion), is considering products that invest in super-long JGBs and inflation-linked notes, according to Chief Executive Officer Tomoya Asakura. The funds are expected to attract around 100 billion yen in total within two years, as investors look for ways to boost returns in the face of a revival in inflation, he said in an interview.
“We are now in an era where interest is being paid,” said Asakura. “There are various products you can think about creating.”
The Bank of Japan's tweaks to its ultra-loose monetary policy have brought focus back to the once-sleepy $8.5 trillion debt market, where the central bank owns a majority of the notes. Open interest in the front-end JGB futures contract hit a 23-year high last month, while financial firms have stepped up their hunt to hire bond experts in preparation for more volatility as yields rise.
Japan's 10-year government bond yield reached the highest level since 2014 on Wednesday, hitting 0.675%. The BOJ's policy tweak allows it to rise to as high as 1%, although the central bank has been stepping into the market to control the pace.
If launched, an inflation-linked JGB fund would mark the first such dedicated product since 2014, according to Investment Trusts Association data on existing funds analyzed by Bloomberg News. It comes amid a rare patch of sticky inflation in Japan.
Inflation-linked bonds may appeal to investors given the risk that the pace of price growth may stay above yields on nominal JGBs, Asakura said.
A fund targeting retail investors with super-long JGBs would also be the first set-up since 2016, the data show.
SBI's planned vehicle will focus on notes with maturities at 20 years or above, which are usually difficult for retail investors to access, according to Asakura. Life insurers' steady purchases will likely support their prices, he said.
SBI plans to launch the funds as early as this year or at least by the end of March 2024, he said, adding that the firm tends to “move quickly.”
--With assistance from Cormac Mullen and Masaki Kondo.
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