26
FUND SELECTOR JAPAN EQUITIES
Top ranked funds Three-year performance
FUND SELECTOR’S CHOICE
Nick Sketch, senior investment director, Rensburg Sheppards
For many years, many of the best-regarded Japanese funds, including names such
as Polar and Atlantis and perhaps Martin Currie and Schroder as well, could be
described as traditional stockpickers.
But the big winner in the past few years has probably been Fidelity’s FAST Fund.
This, in principle, is a 130/30 fund with typical net equity exposure between 90%
and 110%. Charges are not low but it represents the purest way to get exposure to
Fidelity’s ability to pick both winners and losers in Japan. Indeed, it was recognising
that its analysts had historically done at least as well when picking losers as winners that led it away from
its traditional long-only funds to one that uses derivative-based leverage and synthetic shorting of stocks.
Like Fidelity fund’s managers, those in charge of some of the other leading funds on this list have a high
weighting in the multinational mega-caps that dominate the top of the index. At times when everywhere
was growing faster than Japan, this proved wise. But if the case for Japan assumes that life is now
getting tougher for the rest of us, too, many of these managers will need to change their spots if they
wish to remain at the top of the performance tables.
At the same time, performance-hungry investors may need to find well-run funds whose performance
has not been inspiring in recent years due to being more biased toward domestic and multi-cap investing.
But this does not mean that funds with a consistently high weighting in the mega-caps will lose all
relevance: many investors will be content to let a good stockpicker in this area take care of their only
permanent dedicated Japanese holding, choosing to ‘rent’ funds of other types for a few years when
the domestic investment conditions encourage it.
Top 10 funds by 3-year performance
1 Sep ’05 – 1 Sep ’08. Bid to bid, $, gross income, no cap. Source: Morningstar
To say that the past year
has been a tough one for
managers of Japan equity
funds would be like
saying 2008 was not one
of Lehman Brothers’ best.
Of the ten companies on
our Fund Selector list of
best performers over three
years, all lost money in the
Top 3-year performers vs index
40
%
20
80
FAST – Japan A Acc ¥
60
0
SGAM AI Equisys
-20
Fund Japan I1
M’star IM EQ Japan
Sep ’05 Mar ’06 Sep
Mar ’07 Sep
Mar ’08 Sep
Bid to bid, $, gross reinvested. Source: Morningstar
Japan equities
sector avg
12 months to 1 Sept.
The best performer in this
period, Société Générale
Asset Management’s
£28.53m SGAM Alternative
Investment Equisys Fund
Japan, topped the league
table with a ‘mere’ 2.3%
loss – possibly helped by
having a long/short strat-
3-year 3-year 3-year 3-year 3-year M’star Fund Domicile
% chg Alpha Beta R² volatility Ratings size ($m)
FAST – Japan A Acc ¥ 25.19 0.51 1.11 0.72 4.8 ★★★★★ 222.04 Luxembourg
Vitruvius Japanese Equity Eur 24.64 0.5 1.28 0.76 5.4 ★★★★★ 527.88 Luxembourg
SGAM AI Equisys Fund Japan I1 17.2 0.41 0.3 0.19 2.53 ★★★★ 28.53 Luxembourg
MS INVF Japan Value Equity A ¥ 15.62 0.29 0.87 0.82 3.53 ★★★★ 600.57 Luxembourg
Invesco Japanese Equity Core A 13.11 0.23 0.84 0.76 3.55 ★★★★ 73.91 Ireland
Callander F – Japan New Grow C1 12.67 0.21 1.06 0.78 4.45 ★★★★★ 213.23 Luxembourg
EFG Asia Pacific 12.65 0.24 0.99 0.62 4.66 – 1.78 Luxembourg
Metzler Japanese Equity Fund 12.12 0.2 1.11 0.79 4.61 ★★★★ 580.54 Ireland
ZI MS SICAV Japanese Equity 11.6 0.21 0.88 0.6 4.19 – 0.02 Isle of Man
Close Invest Japanese Eq A Acc 11.5 0.22 0.61 0.62 2.89 ★★★★★ 31.34 Ireland
Vitruvius Japan
Equity Eur
INTERNATIONAL ADVISER [www.international-adviser.com] OCTOBER 2008
egy. By comparison, the
£580.54m Metzler Japanese
Equity Fund, which at
the end of July was 94.5%
long, with the rest in cash,
fell 22.2% – the biggest
decline of the bunch over
the year.
These performances
compared with an eyewatering
average decline
for all funds in the sector
of 20.7% during the year,
and a fall in the Tokyo
stock exchange Topix
Index of 15.3%.
As Nick Sketch, senior
investment director at
Rensburg Sheppards notes,
the best performer over
the full three years in the
Japan offshore sector – and
the second-best performer
in the year to September
– is one of Fidelity
International’s so-called
FAST funds.
Like the SGAM fund,
Fidelity’s Luxembourgdomiciled
Fidelity Active
Strategy range, which also
includes a FAST Europe
Top 10 funds – risk and return
30 SGAM AI Equisys
Fund Japan I1
10
Return (%) 20
-10
Sector average
2
3 4
5 6
Standard deviation (%)
1 Sep ’05 – 1 Sep ’08. Bid to bid, $, gross income, no cap
Source: Morningstar
0
Close Invest
Japan Eq A Acc
MS INVF Japan
Value Equity A ¥
Invesco Japan
Equity Core A
ZI MS Sicav
Japanese Eq
fund, takes advantage of
shorting in order to make
money in a falling market.
l Turbo-charged
Both of the FAST funds are
aimed at institutional investors
and high net worth
individuals, with a minimum
investment of
$50,000.
Earlier this year they
were made Ucits III compliant
to make them more
accessible to European
investors.
The FAST funds, which
Fidelity describes as ‘turbocharged’,
use derivativebased
leverage and synthetic
shorting to boost investment
returns. According to
the fund house, they are
the most aggressive equity
funds in its stable.
The FAST funds can
also invest up to 30%
of their portfolio outside
their respective benchmarks,
which for the FAST
Japan Fund is the MSCI
Japan Index.
Since it was launched in
October 2004, the £222m
FAST Japan Fund, managed
since 2006 by JuneYon
Kim, has produced a return
of 50.3%, compared with
the MSCI Japan Index’s
return of 35.6%.
Sketch says: “Currently,
the fund is overweight in
IT and underweight in the
consumer discretionary and
materials sectors, but this
is not a fund with a strong
and consistent style; it has,
however, been a consistent
winner so far.”
FAST – Japan A Acc ¥
Callander F –
Jap New Grow C1
Metzler Japan
Equity Fund
Vitruvius Japan
Equity Eur
EFG Asia Pacific
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