Fund managers overweight in Japan

Fund managers are more than two percentage points overweight in Japanese equities within their global portfolios relative to the MSCI World Free Index according to the latest Morningstar European Fund Trends Survey.

Morningstar.co.uk Editors 26 January, 2006 | 12:02AM
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It is key that we highlight the fact that this survey, which focuses on Japan, was answered by fund groups during days of both uncertainty – such as the investigation of internet company livedoor and the forced, early close of the Tokyo Stock Exchange on January 18th – and increased volatility.

Some 69% of fund groups participating in this survey were planning to hold their current weightings in Japanese shares.. However, slightly more fund groups (17%) said they are about to increase their positions compared with those who said they are about to reduce their position (14%).

Looking globally, 70% of fund groups said they expect

the MSCI World Index to rise between 5-10% over the coming year. Almost a fifth said they foresaw rises of 10-15% while none expected a negative return from global equities.

Large cap companies were expected to offer the best performance with 74% favouring their prospects over those for small firms. Growth-oriented shares were also expected to do well with 56% saying they were likely to outperform their value counterparts.

Currency picks

In terms of currency the yen was the top choice for the best performing currency in the next 12 months. However, the euro was a close second with 43% of managers favouring it. The dollar was overwhelmingly expected to offer the poorest returns with 64% of fund groups saying it would be the worst performing on a relative basis.

These preferences were also reflected in the managers’ expectations for regional performance. Some 30% said Japan would do the best over the next year while 23% chose Asia excluding Japan and 16% favoured Europe excluding the UK. The US and the UK were the top choices for worst expected performance.

Turning to stockmarket sectors Energy and Industrial Materials were expected to be the best performing areas over the next 12 months. The Utilities and Telecommunications sectors were expected to be the worst performers.

Morningstar’s European offices conducted this survey from January 16th-23rd. In total 43 fund management groups from 11 countries participated. On average they each managed €51 billion (£35 billion) and offered 101 retail funds.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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