Nikko Asset Management will launch an exchange traded fund to be managed using a long-short strategy that targets Japanese equities.
This ETF, claimed to be the first of its kind in Japan, will be launched on March 9 and listed on the Tokyo Stock Exchange on March 13.
The new ETF will invest in an equity portfolio made up of high dividend-yield Japanese equities that minimise volatility, while also taking short positions on futures (beta hedging) in order to minimise price sensitivity (beta) to volatility in the overall market.
The EFT is intended to secure stable returns by reducing the impact of volatility in the overall market through beta hedging while benefiting from high dividend yiles.
It will be linked to the Long Short Strategy Index on MSCI Japan IMI Custom (Price) 85% + CASH (JPY) 15% Index, which as its name suggests is an index where the Japanese equity long-short strategy and the cash component are weighted in an 85:15 ratio.
Its long-short strategy focuses on high/dividend and low-volatility Japanese equities.
This strategy neutralises the portfolio to volatility exposure in the overall market by buying and holding a mixture of shares with a certain liquidity and relatively high dividend yields, while at the same time utilising TOPIX futures to take short positions on the movement of the overall market.
Another core characteristic is that the index excludes all financial stocks such as banks, insurers and brokerages, in addition to Japan’s real estate investment trusts.