FE Analytics data shows that 29 funds count the £1.2bn fund as a top-10 holding. Other actively managed funds to feature on the list include Jupiter Japan Income and Schroder Tokyo.
As with a number of other sectors highlighted in this series, passive funds have proven popular with managers. Both BlackRock CIF Japan Equity Tracker and HSBC Japan Index feature high up on the list.
Most popular Japan funds among fund managers
| Name | Number of funds that hold it |
|---|---|
| GLG - Japan Core Alpha | 29 |
| BlackRock - CIF Japan Equity Tracker | 15 |
| Jupiter - Japan Income | 14 |
| HSBC - Japan Index | 6 |
| Schroder - Tokyo | 6 |
Source: FE Analytics
There has been renewed hype surrounding Japanese equity markets in recent months, in no small part due to its strong absolute and relative performance during the 2012/2013 rally.
Many industry experts believe the Bank of Japan’s confirmation of further monetary stimulus will push prices even higher: star managers such as Alastair Mundy, Steve Russell and Hugh Young have all backed Japan to perform strongly this year.
Many fund of funds managers are looking to capture this potential upside through the GLG Japan Core Alpha fund, which has a strong value bias.
It was launched in November 1999, with Harker taking it over in January 2006. Jeff Atherton joined the fund’s management team in the spring of 2012.
GLG Japan Core Alpha is a top-quartile performer in the IMA Japan sector over 10 years, with returns of 148.68 per cent. Under Harker, the fund has also beaten its benchmark, the TOPIX.
According to FE Analytics, it has returned 40.63 per cent over five years, compared with 27.97 per cent and 27.42 per cent from its peers and benchmark, respectively.
Performance of fund vs sector and index over 5yrs
Source: FE Analytics
The fund has been more volatile than the index and the sector over that time, however.
The manager’s value approach has been out of favour more recently, causing the fund to underperform against both the sector and the index over one and three years.
However, it has benefited from the recent rally in Japanese equities, with top-quartile returns of 26.99 per cent over the past six months.
Richard Troue (pictured), investment analyst at Hargreaves Lansdown, says GLG Japan Alpha Core is one of the best portfolios in its sector.
"Over the longer term, Harker has a good track record and a process that has yielded good results. He has a contrarian, value bias, where he looks for sound but lowly rated companies." "That has led him to larger companies in recent years which, for lack of a better word, have got absolutely battered. Exporters have seen their profits damaged by a stronger yen and by the general lack of growth."
"However, with lots more quantitative easing on the way, these stocks are now back in favour, and performance has improved as a result."
"It is a higher-risk fund and can experience periods of underperformance, but we think it can do very well in the future," he added.
The fund has a total expense ratio (TER) of 1.66 per cent and is available to retail investors through a number of platforms.
FE Alpha Manager Bill McQuaker recently told FE Trustnet that buying GLG Japan Core Alpha was one of the best investments he ever made, because of Harker’s active style.
It is a top-10 holding in his Henderson Multi Manager Income & Growth and Henderson Multi Manager Active portfolios. GLG Japan Core Alpha is also the third-largest holding in FE Alpha Manager Martin Gray’s CF Miton Special Situations Portfolio, making up 3.8 per cent of AUM.
The £531m BlackRock CIF Japan Equity Tracker crops up in the top-10 holdings of 15 funds of funds, making it the second most represented Japanese portfolio overall.
It is popular among the fund of funds ranges of Aviva, Standard Life and Architas.
The passive fund gives investors high levels of exposure to blue chips such as Toyota, Honda and Mitsubishi.
The BlackRock fund tracks the FTSE Japan index, along with the HSBC Japan Index fund, which also features on the top-10 list.
The third most popular Japanese portfolio among managers is Simon Somerville’s Jupiter Japan Income fund.
Fourteen funds count it as a top-10 holdings, including Tom Becket’s PSigma Dynamic Multi Asset fund, and Bill McQuaker’s Henderson Multi Manager Active portfolio.
The £549.8m fund was launched in September 2005. Over that time it has returned 40.62 per cent compared with 26.15 per cent from the Topix and 18.03 per cent from the IMA Japan sector .
Performance of fund vs sector and index since Sep 2005
Source: FE Analytics
Jupiter Japan Income has also beaten its peers over one, three and five years; however it has not broken into the top quartile of its sector over any of these periods.
The three crown-rated fund has a yield of 2.2 per cent, requires a minimum investment of £500 and has an ongoing charges fee (OCF) of 1.75 per cent. It is the only fund in IMA Japan that is included in the FE Select 100.
The last name to feature on the list is the £947m Schroder Tokyo portfolio, which is a top-10 holding in six funds of funds.
Andrew Rose’s fund has beaten the sector over three and five years, but has underperformed over the last decade.
Its much longer-term record is still relatively strong, though. Anyone who had bought the fund when it was launched in 1989 would have seen returns of 102.22 per cent, compared with a mere 5.33 per cent from the IMA Japan sector average.
Schroder Tokyo has an OCF of 1.67 per cent and requires a minimum investment of £1,000.