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Ten global funds capitalising on Japan’s surprise QE boost

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06/11/2014
Just 24 hours after the Federal Reserve ended QE in the US, the Bank of Japan surprised global markets last Friday by extending its own stimulus programme. We look at ten global equity funds which may benefit.

The Bank of Japan’s 31 October decision to increase its quantitative easing programme to 80 trillion yen a year – up from a previous target of 60-70 million – caught many unawares, not least Japanese equity investors.

The Nikkei 225 rallied 4.5% on Friday and has continued to rise sharply this week, now standing more than 8% higher.

With the yen having sold off again as a result of the looser monetary policy measures, UK investors may have to factor in the yen’s concurrent 4% fall against sterling – though many funds hedge their exposure to Japan for this reason.

Looking ahead, however, the Bank of Japan’s latest display of commitment to the Abenomics programme of reforms will have many global investors interested again.

Below are the ten funds in the IMA Global sector with the largest allocations to Japan as of the start of last month, according to FE.

SJP High Octane (29.1% in Japanese stocks)

Oldfield Partners’ Richard Oldfield, manager of the St James’s Place fund, will be hoping the stimulus boost represents a turnaround in fortunes for a fund which is firmly in the bottom quartile of the sector on a one-year view. Top ten holdings in the likes of Mitsubishi UFJ Financial, Toyota and Japan Airlines will help the fund if Japan’s rally continues.

Neptune Global Equity (26.7%)

Manager Robin Geffen has positioned his portfolio for a stronger dollar/weaker yen theme in recent months, and has hedged his yen exposure in expectation of further weakening. He said this week he had been buying real estate stocks such as Sumitomo Realty & Development, correctly anticipating the next stage of easing announced last Friday.

Lindsell Train Global Equity (25.9%)

Michael Lindsell’s bullishness on the Japanese market is no surprise, given Lindsell Train’s three open-ended portfolios also count a Japan equity fund among their number. His largest holdings in the country are unlike most of those found in global equity funds: games manufacturer Nintendo and cosmetics firm Shiseido both feature in the fund’s top ten positions.

R&M Global Opportunities and Global Equity (22.2% and 19%)

Manager Alex Stanic said earlier this year his portfolios’ performance was being held back by his Japan overweight, amid a volatile first six months for the Nikkei and the Topix. Recent events will have made the former Newton manager happy to have held on to that overweight.

GAM Global Diversified (21.5%)

Andrew Green’s preference for Japan over other markets has been based on what he sees as a significant valuation gap between it and the US. The manager said last month that recent outperformance of the Topix versus the Nikkei bodes well for his overweight to Japanese banks – the sector is more heavily represented in the former index.

F&C International Heritage (21.3%)

A small F&C portfolio dedicated to seeking out investments that benefit society, the fund’s Japan weighting will be partly influenced by a remit which means it invests outside the US. Nonetheless, the portfolio’s top holding, Toyota, forms part of a Japan weighting which has been increasing since the start of the year.

IWI Global Thematic Portfolio (17.2%)

Laurence Boyle’s former Williams de Broe portfolio, now rebranded under the Investec Wealth monicker, invests in Japan-focused funds including CC Japan Alpha and JOHCM Japan as part of its global remit. Boyle presciently said last month that “belief persists the Bank of Japan will act again at some point to stimulate the economy.”

Brown Shipley Dynamic (16.4%)

Simon Nicholas’ portfolio includes significant holdings in GLG Japan Core Alpha and Jupiter Japan Income: his optimism on the region was strengthened last month by early signs of “encouraging” quarterly reports from the region.

Artemis Global Select (14.9%)

Run by Simon Edelsten, Alex Illingworth and Rosanna Burcheri, the fund has held an overweight to Japan for much of its three-year existence. Edelsten visited the country last month and noted that, while some enthusiasm for Abenomics had waned, the managers are being “paid to wait” via lowly-valued stocks that yield 3% despite a payout ratio of half that seen in Europe.

Threadneedle Global Select (14.8%)

William Davies’ Threadneedle portfolio counts the likes of Sekisui Chemical in its top ten holdings, but it is the fund’s 2.2% position in Mazda that could reap the most benefits, given a weaker yen should help exporters regain their global competitiveness.

 

All weightings as at 30 September. Source: FE

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