Mid-Year 2024 Highlights
Our SPIVA Global Scorecard highlighted the challenging market conditions for active equity managers around the world in the first half of 2024. Japan was no exception—out of 929 total active funds across all Japan fund categories, a large majority (71%) underperformed their assigned benchmarks.
The strong gains in the overall equity market accompanied by the outperformance of the very largest companies provided difficult stock-picking grounds for Japanese equity managers in H1 2024. Over two-thirds (68%) of All Japan Equity funds failed to keep up with the S&P Japan 500’s total return of 20.7%. While 70% of Japan Large-Cap funds trailed the S&P/TOPIX 150, Japan Mid-/Small-Cap funds fared better with a 52% underperformance rate against the S&P Japan MidSmallCap.
Non-domestic equity funds domiciled in Japan struggled more in general, with the underperformance rate ranging from 68% in the International Equity category to 86% in the Emerging Equity category in H1 2024. This is in line with the long-term trend of relatively higher underperformance rates; over a 15-year period, 91% to 100% of funds in these categories underperformed their respective benchmarks (see Exhibit 1).
Market Context: H1 2024 and Beyond
Along with other developed markets, Japanese equities had a strong start to the year, with the S&P Japan 500 up 20.7% in H1 2024. Some of these gains were lost, however, with the index finishing Q3 2024 up 14.7% YTD. The shift in the Bank of Japan’s monetary policy resulted in heightened volatility across Japanese equities, bonds and currency. While the S&P/JPX JGB VIX, a measure of Japanese government bond volatility, remained elevated at an average of 3.76 YTD (versus the previous five-year average of 2.63), the Japanese yen swung from a 12.4% loss in H1 2024 to a 11.8% gain in Q3 2024 against the U.S. dollar (see Exhibit 2).
