Core Insights - The Japanese active equity fund market is experiencing growth, with its share in the public equity fund market at 58.1% as of the end of 2024, despite the rapid rise of passive funds [3][5][4]. Group 1: Market Trends - The Japanese ETF market has grown significantly since 2010, reaching 89.4 trillion yen by the end of 2024, accounting for 38.8% of the public equity fund market [4][5]. - Active equity funds have shown a compound annual growth rate of 5.3% from 2013 to 2024, indicating a sustained increase in their scale [5][3]. - The proportion of passive index funds in the public equity fund market has surged from 8.3% to 32.1% between 2013 and 2024, reflecting a shift in investor preference [4][5]. Group 2: Challenges Facing Active Funds - The active equity fund market faces challenges such as a dominant presence of foreign capital and products, high outsourcing costs, and a decline in the perceived value of local fund managers [3][7][10]. - The profitability of asset management companies is under pressure due to price competition in the passive fund sector and high costs associated with outsourced management in the active fund sector [10][9]. - The demand for Japanese stocks is low, leading to a reliance on foreign investment strategies, which further complicates the landscape for domestic active funds [8][9]. Group 3: Opportunities for Active Funds - There is potential for growth in the active fund market, particularly in emerging markets where active funds have historically outperformed [11]. - Independent asset management firms in Japan are showing superior performance compared to those under financial groups, indicating a potential shift in market dynamics [15][14]. - The focus on alternative investments is becoming a new trend among asset management firms in both Japan and the US, which could enhance the sources of excess returns [3][11]. Group 4: Fee Structures and Market Dynamics - The average management fee for active funds in Japan has decreased to 1.10%, while passive funds average 0.35%, highlighting the competitive pricing environment [24][23]. - The structure of fees in Japan is designed to encourage long-term holding of funds, which places higher demands on the capabilities of active fund managers [23][22]. - The transparency of product management is a significant issue, with many funds not disclosing the names of their managers, which can impact investor trust and fund performance [20][19].