Performance of sectors vs index over 6-months
Source: FE Analytics
The IMA Japan and IMA Japanese Smaller Companies sectors managed a fairly rapid recovery up to August, before recent market turmoil saw both sectors and the Nikkei 225 losing at least another 7 per cent.
Small caps in the region have rebounded once again – smaller Japanese equities were one of the winning asset classes over the summer’s turmoil – but other Japan funds have struggled to bolster their performance.
Managers remain hopeful, though. "The tragic earthquake that hit Japan had a significant impact on the economy. However, recent results have been better than many companies forecast initially," said John MacDougall, manager of Baillie Gifford Shin Nippon.
"Smaller company valuations remain attractive and in many cases suggest that the market does not expect any growth, which we believe is overly pessimistic."
MacDougall bought medical equipment group Nikkiso and airline Skymark following the crisis, saying they were good value and had the potential to grow.
Performance of funds over 6-months
Source: FE Analytics
The best-performing Japanese funds in the period include Legg Mason Japan Equity, JPM Japan and FF&P Japan Equity, which have returned 16.3 per cent, 6.2 per cent and 4.2 per cent respectively.
Performance of funds vs sector over 6-months
Source: FE Analytics
This hasn’t been such a strong six months for individual IMA Japanese Smaller Companies funds.
The best-performing of these over the period were Aberdeen Global Japanese Smaller Companies, Baillie Gifford Japanese Smaller Companies and Threadneedle Japan Smaller Companies. The funds returned 5 per cent, 2.1 per cent and 1.4 per cent respectively.