United Kingdom Fund Managers and Institutional Investors' Attitudes Toward Japanese Equities

Abstract

This article explores UK fund managers and institutional investors' attitudes toward Japanese equities. We find a declining home bias of UK pension funds vis-à-vis Japanese equities since the early 1990s. However, for the most part, this decrease is a reflection of Japan's decreasing equity market and gross domestic product weights. Only in the 2000s did UK pension funds increase their Japanese equity holdings slightly. While our informants showed a comparatively high degree of variance in opinions about market factors, certain macro and institutional factors—namely, economic growth, deflation, demographics, and corporate governance—were rated high as explanatory factors for an overall low enthusiasm in Japanese equities. Our discussion confirms that these factors appear to make investments in Japan comparatively less attractive.