Japan has been hotly tipped as the market to deliver top returns in 2015. Forecasters believe UK shares face the uncertainty of at least one – if not two – General Elections, European companies are plagued by economic doubts and the US is still far too overvalued to deliver strong returns.
Whether or not you believe the forecasts regarding the rest of the world stock markets, Japan does have some compelling fundamentals. Having been re-elected in December, Prime Minister Shinzo Abe has bought himself the time to ensure his economic overhaul stays the course.
“Abe went for a quick snap election and that probably gives him a mandate to take more action with regard to the third arrow, the structural reforms, which means more good news for the Japanese market,” said Morningstar’s head of fund research Jeremy Beckwith.
“Japan is a market where corporate earnings are almost certainly being underestimated by the analysts, because the weakness of the yen last year has not yet flowed through into higher earnings estimates. It’s a market where the policy makers are determined to try and create some sort of inflation and so they are printing money. And Japanese valuations are amongst the lowest in the world of the developed markets – all of which is positive for investors.”
We used the investment trust screener and the fund screener to identify highly rated Japan funds holding either a Gold, Silver or Bronze Morningstar Analyst Rating, for investors looking to add to their Japanese exposure.
Baillie Gifford Japan (BGFD)
Gold Rated Baillie Gifford Japan is a standout among its peers. Fund manager Sarah Whitley has spent nearly 30 years investing in Japanese equities at Baillie Gifford and heads the Japanese equity team. Analysts consider that depth of experience invaluable.
Whitley has invested through a variety of market conditions in Japan and delivered solid returns for shareholders over her tenure, even when the market itself has been down or flat.
Jupiter Japan Income
This Silver Rated fund is a solid choice for an investor's allocation to the Japanese market. It earns the Morningstar Fund Analyst Silver rating based on the managers’ excellent execution of their process, which they have adhered to since the fund’s launch.
Schroder Tokyo
Fund manager Andrew Rose has run Japanese equity portfolios since the Eighties and is one of the most experienced managers in the peer group. He is supported by a strong team of analysts and portfolio managers based in Tokyo, which he headed until he moved to London in the mid-Noughties.
Analysts believe he is adept at using the resources to his advantage, and the quality of the group’s in-house research capability gives it an edge. They have awarded the fund a Gold Rating.
