Daiwa SB Investments launched a focused Japan equities fund in April that raised a modest ¥30 billion ($36 million). Despite its small size, it represents a new trend: Japanese fund managers launching equity products.

Since 2008, virtually every product introduced or heavily marketed in Japan has involved paying monthly dividends, because most investors are elderly people relying on the income to supplement pensions and annuities.

As mutual fund sales have slumped in most of Asia, Japan’s ¥68 trillion ($830 billion) market managed to recover from the 2008 crash thanks to the so-called ‘double-decker’ structure of overlaying exposure to high-octane emerging-market currencies against income funds, which were invariably foreign fixed-income or Reit strategies.

Low domestic interest rates, a strong yen, surging currencies of emerging markets and commodity producers, and easy gains in US spread products have made this possible. But as the US high-yield bond story plays out and as managers look to the likely depreciation of the yen, they are starting to return to equities, both foreign and domestic.

In some cases, these are meant as standalone products, providing superior returns via highly concentrated portfolios that don’t hew to a benchmark such as the Nikkei 225 or Topix.

For example, in February, Tokio Marine Asset Management launched a domestic equity fund focused on corporate governance, says Akiyoshi Oba, president and CEO.

Similarly, Nikko Asset Management is considering introducing absolute-return equity funds by tailoring existing hedge-fund products for the retail market, says Kunihiro Asai, head of product development.

But others are looking to replicate double-deckers by using equity funds instead of bond products. Daiwa SB’s focused fund launch comes in tranches in yen, Australian dollars, Brazilian real, Chinese renminbi and Indonesian rupiah. Initially marketed through just one securities company, Daiwa SB is now lining up more wholesalers and expects to gather plenty more assets, says president and CEO Masamichi Yokoi.

Nomura Asset Management has also recently launched an equity fund that comes in a double-decker structure.

JP Morgan Asset Management may be the first foreign house to follow suit, with a new launch based on US small caps and upcoming products including Japan equities and Asia ex-Japan equities.

JP Morgan AM is in discussions with distributors about whether these equity products should come with a currency kicker, says Nobuaki Inomata, president. Equity products will not be able to generate the steady high returns that US high-yield has provided over the past few years, and therefore distributors must decide whether to present equity-backed products as income funds.

Double-decker or standalone, however, Japanese fund managers and their distributors are rapidly shifting. Last year’s story was all about global fixed income, but this year will see a swing back to equities.

For a more in-depth look at these trends, see AsianInvestor magazine’s June edition.