Whilst selecting managers with a value style has historically been rewarded in Japan over the long run, timing often matters and for investors unwilling to make directional bets on the Japanese equity market, blending different styles and approaches can be a good way to get exposure to Japan.
On the active side, and as can be expected given the tough environment Japanese equities have faced in the last two decades, there have not been many fund launches in the last few years. The largest players have attracted the bulk of the flows, such as GLG Japan CoreAlpha and Polar Capital Japan, both of which have limited remaining capacity.
Polar Capital Japan
The Polar Capital Japan fund carries a Morningstar OBSR Analyst Rating of Silver. The fund has been managed since its launch in 2001 by a seasoned investor, James Salter, who has over 20 years of experience investing in Japanese equities. Salter uses an approach that combines top-down considerations, particularly at what he believes to be key turning points such as 2008 and 2012, with a relative value stock selection process. The fund is well-equipped to outperform across a variety of market conditions and investors have been rewarded over the long term. However, a notable feature of the fund is the small- and mid-cap exposure, which usually accounts for around 60% of the portfolio and can lead to the fund having a more volatile performance profile.
GLG Japan CoreAlpha
The GLG Japan CoreAlpha fund carries a Morningstar OBSR Analyst Rating of Gold. The fund has been managed by Stephen Harker and Neil Edwards in its current form since early 2006 - a point at which the managers believed larger cap stocks were likely to deliver strong long-term excess returns due to their compelling attractiveness. The team employs a distinct bottom-up approach with a deep value style, which leads them to be contrarian and often early into positions. Investors should be patient as the fund’s performance profile can be volatile; however, since launch investors in the fund have been well rewarded.
iShares MSCI Japan
iShares MSCI Japan is one of the largest ETFs in Japan. iShares was also one of the first few groups to offer currency hedged share classes and it is therefore unsurprising that the fund has attracted substantial fund flows over recent years, reaching an overall fund AUM of around $3 billion.
