* Investors pull out 31 bln yen from toushin
* First net fund outflow in 6 months
* Financial industry freezing toushin sales after FSA
* FSA says 99 pct of toushin not suitable for long-term
* New toushin launch likely to hit record low in May
By Tomo Uetake and Hideyuki Sano
TOKYO, May 16 Japanese investment trusts, or
"toushin", saw the first net outflow of funds in six months in
April, the industry data showed on Tuesday, after the head of
the country's financial watchdog made a scathing criticism on
Investors pulled out 31.1 billion yen ($275 million) of
funds out of "toushin" in April, the first monthly net outflow
In another indication of the slowdown in business, the
number of new fund launches in May was also likely to be around
20, which would be the lowest on record in data that dates back
to 2007, said the Investment Trusts Association, Japan.
If outflows from the toushin funds accelerate, that could
force fund operators to sell assets they have invested and
Industry officials say many financial institutions have
slowed or refrained from aggressive sales of some toushin funds
after Nobuchika Mori, the commissioner of the Financial Services
Agency, blasted Japanese asset management industry for not
catering to the true benefit of its customers.
In a speech to financial professionals in early April, Mori
railed at Japanese investment trusts' high fees and low
The average return of about 280 active Japanese stock funds
is 1.4 percent over the last 10 years after deducting fees, with
a third of them making losses, compared to average annual gains
of 3 percent in the Nikkei share average, he said.
Noting that a panel of experts concluded that 99 percent of
toushins are unsuitable for long-term investment, Mori called
for fund operators to take an action.
"How long are you going to keep this practice? Would
customers who could not get a decent return on financial
products they bought increase investment?" Mori challenged
Shocked by his blunt public rebuke, asset management firms
virtually stopped sales activities, industry sources said.
"After the FSA's comments, sales staff are in the dark on
what they should sell, or recommend to their customers," said an
executive at a European asset management firm.
They say net fund outflows appear to be increasing in May.
Asset management firms are expected to disclose plans in June to
make themselves more customer-oriented.
Yoshio Okubo, vice chairman of the Investment Trusts
Association said he cannot rule out the possibility that Mori's
comments had some impact, adding that the industry will make
efforts to win confidence of the public.
The Japanese investment trust industry manages about $1
trillion yen of assets, channelling Japanese investors' funds to
stocks, foreign bonds and currency markets.
($1 = 113.30 yen)
(Additional reporting by Emoto Emi; Editing by Simon