Japan's Topix index, tracking about $1 trillion in funds, has removed nearly 700 small companies to simplify the index and attract investment. This cull eliminates firms comprising just 3% of total market cap, making room for AI-enabled funds to target the ejected smaller companies. Japan's market wealth concentrates in large caps, but the Topix remains sprawling, holding over 1,600 companies from Mitsubishi UFJ Financial to tiny Prored Partners.
These small, illiquid firms are difficult for passive index trackers to access. Meanwhile, MSCI's Japan index covers the investable market with far fewer companies. AI tools are positioned to identify value among these offcuts by analyzing thousands of reports.
Early adopters like Robeco and BlackRock are launching AI-driven small-cap ETFs, with Robeco's fund up 13% year-to-date against broader index performances of 9% and 3%. For tech-enabled investors, the streamlined Topix and AI-driven selection offer new avenues among the offcuts.
Source: Financial Times Markets · Summarized by HeadlinesBriefing