Top ranked funds Newcomers
As new funds go, the
£8.78m JF Ultra Japan Fund,
launched in February 2006,
is off to a promising start.
It was the only one of
ten funds in existence for
longer than one year but
fewer than three years
to register an increase in
the 12 months to 1 Sept,
2008 – during which it
posted a 2.1% gain. This
positive performance also
enabled it to beat the sector
average (-20.7%) as well
as the Topix (-15.3%) over
the period.
The Cayman Islandsdomiciled
Oeic is managed
by Hong Kong-based JF
Asset Management (JFAM),
an arm of JPMorgan Asset
Management, under lead
manager Hirohisa Koga.
The fund follows a
bottom-up investment style,
looking to invest in undervalued
Japanese stock that
its managers believe have
“good growth potential,
regardless of market cap”.
The fund is able to make
use of derivatives to hedge
against market downturns,
which is likely to have
been helpful in enabling
it to register that gain in
the year to the end of
August even as the Tokyo
stock market sank by more
than 15%.
In an outlook statement
on JFAM’s website
dated 31 July, Koga noted
that the Japanese market
was likely to “continue to
be affected by external
risks such as the global
credit crisis and volatile
commodity markets”, and
said that he and his team
would “continue to keep
an almost neutral position
until there are clearer signs
that the situation is turning
for the better”.
l Alternative view
The largest of the new
funds is a Luxembourgdomiciled
version of
Société Générale’s popular
onshore SG Japan Core-
Alpha Fund.
The fund was created
to offer non-UK investors
Top 10 funds with less than a 3-year but at least a 1-year track record
3 Sep ’07 – 1 Sep ’08. Bid to bid, $, gross income, no cap. Source: Morningstar
Top 10 newcomers – 1-year risk and return
Return (%)
-5
-10
-15
-20
-25
FF – Inst Japan Euro Sector average
1.5
2 2.5 3 3.5 4
Standard deviation (%)
3 Sep ’07 – 1 Sep ’08. Bid to bid, $, gross income, no cap
Source: Morningstar
5 JF Ultra Japan Fund A ¥
0
FF – Japan Div
Growth A Acc ¥
Uni-Global Min
Variance Japan B1
MFS Meridian
Japan Equity A1$
Pru IOF Japan Dynamic Equity D
a chance to take advantage
of the Japan strategy of comanagers
Stephen Harker
and Neil Edwards, who
took over the running of
the fund in January 2006.
In less than two years
the fund has already grown
to £191.3m.
Edwards, who describes
his and Harker’s strategy
as “contrarian” (“we buy
the stuff that other people
hate”), says the fund is overweight
financials and technology/media/telecoms
at
the moment, “slightly overweight”
retail, and underweight
commodities.
Harker says he and
Edwards have recently sold
out of some of their defensive
stocks, such as railways
and pharmaceuticals.
He adds: “We have nothing
in areas like wholesale traders,
steel, shipping, machinery,
oil and so on, sectors
[which] comprise roughly
15% of the Tokyo index.”
Towards the end of
September, the electric
SGAM Fund Equity
Japan Corealpha A
MS INVF Japan
Eq Adv FD A ¥
Metzler Focus Japan Inc
OCTOBER 2008 [www.international-adviser.com] INTERNATIONAL ADVISER
UBAM IFDC
Japan Opp
Equity AC
FUND SELECTOR JAPAN EQUITIES
1-year 1-year 1-year 1-year 1-year Launch Fund Domicile
% chg Alpha Beta R² volatility date size ($m)
JF Ultra Japan Fund A ¥ 2.1 0.06 0.02 0 1.71 1 Feb ’06 8.78 Caymans
Uni-Global Min Variance Japan B1 -3.63 0.12 0.61 0.63 1.97 13 Mar ’06 150.4 Luxembourg
SGAM Fund Equity Japan Corealpha A -6.88 0.16 0.93 0.81 2.64 29 Nov ’06 191.26 Luxembourg
UBAM IFDC Japan Opp Equity AC -8.21 0.15 0.84 0.32 3.79 2 Jul ’07 20.57 Luxembourg
FF – Japan Div Growth A Acc ¥ -11.85 -0.04 0.63 0.66 1.96 12 Dec ’05 33.16 Luxembourg
MS INVF Japan Equity Adv FD A ¥ -11.99 0.03 0.86 0.69 2.63 31 May ’06 9.48 Luxembourg
Metzler Focus Japan Inc -12.47 -0.01 0.72 0.38 2.98 15 Nov ’06 6.18 Ireland
MFS Meridian Japan Equity A1$ -13.33 -0.04 0.69 0.47 2.58 31 Jul ’07 5.03 Luxembourg
Pru IOF Japan Dynamic Equity D -13.82 0 0.88 0.78 2.55 3 Jul ’06 2.18 Luxembourg
FF – Inst Japan Euro -14.47 -0.06 0.75 0.66 2.36 2 May ’07 41.06 Luxembourg
appliances sector accounted
for about 24.4% of the
Core-Alpha Fund’s portfolio,
banks for 19%, information
and communications
stocks for 13.8% and retail
shares for 9%. Mitsubishi
UFJ Financial was the largest
holding at 8%.
l A close second
Another interesting offering
is the £150.4m Uni-
Global Minimum Variance
Japan B1 Fund, a Sicav
sub-fund launched in
March 2006 and managed
since its inception by Fiona
Frick. The Uni-Global
Minimum Variance fund
range belongs to Genevabased
Unigestion Fund
Management, a privately
held asset manager catering
mainly for institutional
clients (84%) and high net
worth families.
Domiciled in Luxembourg,
it posted a 3.6%
decline in the year to 1
Sept, 2008, making it the
Top 3 newcomers vs indices
%
16
-16
8
0
-8
Japan equities sector avg
SGAM Fund Equity
Japan Corealpha A
M’star IM EQ Japan
-24
Sep ’07 Nov
Jan ’08 Mar
May
Jul
Bid to bid, $, gross income reinvested. Source: Morningstar
second-best performer of
the ten new funds during
that period.
Year to date, on 31 Aug
it was down 4.73%, compared
with a 14.9% drop in
its benchmark, the MSCI
Japan TR Net Index. This
so-called large-cap fund, as
defined by Morningstar,
keeps just over 60% of its
portfolio in medium- and
small-sized companies.
JF Ultra Japan Fund A ¥
FUND SELECTOR’S CHOICE
Nick Sketch, senior investment director,
Rensburg Sheppards
Société Générale offers an excellent example of a fund that does
what it says on the proverbial tin. It is permanently tilted toward the
mega-caps, with a value bias. The firm does not expect this style to
always be at the top of the shorter-term fund performance tables but
it does expect its stockpicking to deliver index-beating performance
pretty consistently. It has done a good job of this so far and there
seems little reason why it should not continue to do so.
It has also been interesting to see the appearance of a few equity
income funds in Japan in the past few years. Although yields still
look comparatively uninspiring, dividend growth should be much
stronger than at home and the approach may well produce a rather
steadier performance than the average Japanese fund. It may also
remove an excuse that some investors still have for not looking
at Japan and open up the options for those who want some yield
contribution from every holding in a portfolio.
Uni-Global Min
Variance Japan
Sep
27
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