Rayliant Global Advisors, in collaboration with Sumitomo Mitsui DS Asset Management (SMDAM, Financial), announced the launch of an innovative actively managed exchange-traded fund (ETF) that zeroes in on small- and mid-cap Japanese companies. This marks the first ETF of its kind, focusing on a segment of the market that often flies under the radar.
The Nikkei index in Japan surpassed its 1989 peak this February, embarking on a journey of setting new records through March. This milestone has reignited investor interest in ETFs that concentrate on Japanese markets, attracting over $10 billion in investments since the start of January 2023, as per State Street Global Advisors. Unlike the predominantly passive funds that have dominated this influx, the newly introduced Rayliant SMDAM Japan Equity ETF distinguishes itself by targeting firms with market caps ranging from $2 billion to $5 billion.
Jason Hsu, the founder and chief investment officer at Rayliant, points out that these smaller and mid-sized companies are often overlooked internationally, yet they embody the entrepreneurial spirit and growth potential akin to what U.S. investors seek. From Sanrio Co, the powerhouse behind Hello Kitty, to Maruwa Co, known for its high-end electronic ceramic components, the ETF aims to spotlight these dynamic companies.
Despite the rally in Japan's smaller stock sector this year, it has not kept pace with the gains seen by the larger entities in the Nikkei. In terms of yen, while the Nikkei has seen a 17.9% increase so far in 2024, the MSCI Japan Small-Cap Index and the Standard & Poor's Japan Mid-Cap Index have recorded rises of 11.75% and 8.8% respectively, according to Rayliant's data.
Rayliant is set to provide SMDAM with a comprehensive market overview and detailed quantitative analysis of individual Japanese equities. SMDAM will then leverage this with in-depth fundamental research to curate a portfolio comprising 30 to 50 stocks for the ETF. This fund, which will be traded on the New York Stock Exchange, introduces a management fee of 72 basis points.
