Ranging from hip-hop music to premium wines and a ramen court, funds are emerging in myriad fields to whet the appetites of investors tired of the minuscule interest on regular bank deposits and eager for a taste of adventure.

With interest rates glued to almost zero percent for years, analysts said, people are gradually warming to the idea of investing in new financial tools that might offer them the possibility of a higher return.

However, funds — which collect money from investors and pay them a return from profits earned by the investment — are a jumble of wheat and chaff, as the Financial Services Agency pointedly warned last month.

The financial watchdog said in a notice carried on its Web site that some funds do not actually make the investments they claim, and border on the fraudulent.

“It appears consumers don’t have full recognition of which funds are (properly) regulated and which ones aren’t,” said Tamiko Sonoda of the National Consumer Affairs Center of Japan.

This lack of awareness, industry observers say, is due in part to inadequate disclosure on the part of the funds. This in turn keeps consumers from understanding how they work and whether they are worth investing in.

On one side of the spectrum are funds that have seen a measure of success — at least to date.

Among these are funds launched by startup firm Music Securities Inc., a 5-year-old company that now has 19 funds, investing mainly in domestic musicians.

It plans to debut its Mongol Fund later this month to invest in Mongolian hip-hop group Tatar and as many as five other groups from the landlocked country.

“We want to secure a footing in the overseas music market through the Mongol Fund, and are hoping we can raise more funds for musicians in China, South Korea, Singapore and Taiwan,” Music Securities President and CEO Masami Komatsu said.

As for Music Securities’ funds that have already matured, Komatsu boasts that none has fallen below par, with returns falling between 30 percent and 50 percent of the profits logged by artists’ CD sales at their peak.

The firm plans to raise 10 million yen through the Mongol Fund, whose minimum investment amount is 10,000 yen, and pump the money into recording and pushing the groups’ CDs and publicity fees.

The Wine Investment Fund, set up by the first wine investment firm in Japan, Vin-net, also has yet to let investors down.

The firm, established in 2000, used the fund from April to June to raise 1 billion yen to buy young wine before it is bottled as well as vintage wines from Bordeaux, France, and other high-end regions.

Investors get returns from the premium on the wine when Vin-net sells part of it on the market.

The investment method has a history in Europe, according to Vin-net officials.

But some funds, even if not be deemed fraudulent, have not performed as well as investors would like.

Real estate consulting firm Equal launched its Ramen Fund in December 2003, and said it collected more than 100 million yen to invest in the Menkui Okoku (Noodle-Eating Kingdom) food-court complex of eight noodle shops in Shibuya Ward, Tokyo. But it matured several months ahead of schedule after failing to turn a profit.

The Jurassic Park Fund, which aimed at investing in the dinosaur entertainment event Jurassic Park Institute Tour in Tokyo’s Shibuya Ward from July-October 2003, failed to prove a draw.

Visitors during the three-month period numbered 62,000, less than half of initial projections, according to a member of the event’s advertising staff. The company that managed the fund could not be reached for comment.

Most up-and-coming funds are contract-based and not covered by the regulations that govern the sale and management of other financial vehicles or supervised by financial authorities. This has helped lead to a surge in the launch of funds in recent years, industry insiders say.

But given this lack of safety net, potential investors need to understand how each fund works, because they would have to shoulder the risk if its value falls below par at maturity — without being able to cancel beforehand in some cases, according to analysts.

In addition to comprehending a fund’s basic strategy, “those who want to invest should have some knowledge of the business the funds are investing in,” said Yasuhiro Hanamura, general manager of research at Morningstar Japan K.K., a unit of U.S.-based investment research firm Morningstar.

“Otherwise, the person will not be able to discover what the risks are.”

If people understand the target business and still want to offer financial support, they would be satisfied with the investment even if losses ensue, he observed.

For example, Music Securities’ Komatsu said part of the objective of the Mongol Fund is to support emerging young artists in a country where the music industry infrastructure is not yet developed.

“We pick up musicians who have talent and potential but have yet to come into the limelight,” he said, adding that CDs released by the musicians targeted by the fund have been hits in Mongolia, but the country’s music market has yet to be cultivated by Japanese or other foreign capital.

Given the growing number of these funds and the growing potential for illicit activities, financial regulators have started taking action.

Last month, a subcommittee of the FSA’s Financial System Council released an interim report proposing enactment of blanket legislation to plug existing legal loopholes and protect investors from improper sales and canvassing of investment vehicles — not just funds but also other types of new financial products, including foreign currency margin trading.

The panel said it plans to provide more specifics of its discussions this fall and make a final report by the end of the year.

“Some financial products are not covered by any form of regulation,” subcommittee head Hideki Kanda, a University of Tokyo professor, told a news conference after the interim document’s release. “We need cross-sectional rules.”

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