In 1989, during the Early Days of commodity fund, ORIX sold“ORIX Futures Fund Ⅰ”. The fund, that was composed in the tax haven area such as Cayman Islands, etc., was operated abroad. Marubeni, Nissho Iwai, etc. sold their commodity funds respectively with the same product design as ORIX fund, but they were stopped selling by the Ministry of Finance.
The thing questioned by the Ministry of Finance was that any fund incorporated a majority of zero coupon bonds, and as a result, the ministry considered them as securities under the Securities and Exchange Law. Zero coupon bond is issued in discount form, and instead of paying interest, it can be purchased at a price below face value, and as face value comes to be refund on redemption date, a merit is that redemption profit can be obtained.

Against the opinion by the Ministry of Finance, there were objections from stakeholders. In May 1990, Japan Trade Council, Inc., that consists of Japanese major trading companies, formally objected to it. However, the demerit that turns the Ministry of Finance into an enemy was incomparable with flexibility in fund composition, and then, any fund incorporating zero coupon bonds wasn’t composed.
Meanwhile, as to securities companies that came to be admitted selling commodity funds by the Ministry of Finance, in February 1990, to begin with, Nikko Securities Inc. got into commodity fund business. However, due to the policy by the Ministry of Finance, it got to be put in shackles, for instance, insurance companies were prohibited from purchasing commodity funds, etc., so commodity funds didn’t sell as expected, its setting by securities companies didn’t increase.

The Ministry of International Trade and Industry approached commodity funds－momentum grew with setting up a study group

In the same period, it was the Ministry of International Trade and Industry, MITI, (the Ministry of Economy, Trade and Industry at present) that had studied about commodity fund eagerly. In February 1990, the ministry set up “the study group on trading issue of commodity, etc. ”, nominally a forum for general discussion to bring commodity funds under its jurisdiction as well as commodity futures, and advanced the study on methods to sell domestic commodity funds indeed. As MITI started working on commodity fund, opportunity to sell law-free scheme commodity funds by commodity fund sellers, non-securities companies, began to increase certainly. Specifically, they didn’t incorporate zero coupon bonds, and used spot gold and gold futures. To begin with, ORIX, Mitsubishi Corporation, Mitsui & Co., Nissho Iwai Corporation, Sumisho Lease, Nihon Lease, etc. began to sell their commodity funds respectively.

As an example, as to the fund that ORIX sold in 1990, 60 percent of the amount was operated in spot gold and gold futures trading, and the other 40 percent was operated in the other futures trading. In those days, interest rate was high during the bubble period in Japan, gap between spot price and futures price had widened. Therefore, even if 40 percent of the amount would loss in futures trading, as it could turn a profit in spot gold and gold futures, principal could be secured in about seven years. So, this economic situation also became a tailwind for commodity fund.

（to be continued）

（Futures Tribune・issued June 13, 2023・no.3221）