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JO Hambro Japan - the backdrop remains positive

Dominic Rowles | Tue 29 May 2018

Investments can go down as well as up so there is always a danger that you could get back less than you invest. Nothing here is personalised advice, if unsure you should seek advice.
  • Scott McGlashan and Ruth Nash are two of the most experienced Japanese equity investors
  • They think shares in real estate companies are going cheap
  • The fund features on the Wealth 150 list of our favourite funds

Our View

We currently think the Japanese stock market is good value. This means share prices are low compared to their long-term growth prospects. If these prospects are recognised by other investors, share prices could rise.

Spotting companies with outstanding prospects before others isn’t easy though. It takes a keen eye, gained through years of experience.

Scott McGlashan and Ruth Nash are two of the most experienced managers in the game. They manage the JO Hambro Japan Fund and invest in companies of all sizes, including higher-risk smaller companies. This, combined with the managers’ focus on companies out-of-favour with other investors, sets the fund apart from its peers.

We think this fund is a good option for exposure to the Japanese stock market and expect it to do well over the long term although of course there are no guarantees. It continues to feature on the Wealth 150 list of our favourite funds across the major sectors.

How is the fund invested?

The managers think the backdrop in Japan is more positive than at any point during their long careers. Company earnings are growing, the economy is strong, government policy is supportive of Japanese businesses, and many share prices do not reflect the true potential of the companies they pertain to.

The managers have recently spotted value in some of the more economically-sensitive sectors such as construction and retail.

They also increased exposure to real estate businesses. There aren’t many properties for sale in Japan and property prices are high. But the level of construction is increasing and companies that own property are attractively valued, in the managers’ view. Once this is recognised by other investors, the managers think share prices could rise across the industry.

How has the fund performed?

The fund performed well over the past year. We put this down to the managers’ ability to select companies with strong prospects. Top performers include construction company Kyowa Exeo and ball-bearing manufacturer Minebea Mitsumi. Both companies raised their earnings forecasts towards the end of last year, which boosted their share prices.

Annual percentage growth
Apr 2013 -
Apr 2014
Apr 2014 -
Apr 2015
Apr 2015 -
Apr 2016
Apr 2016 -
Apr 2017
Apr 2017 -
Apr 2018
JO Hambro Japan -13.5% 23.8% -2.9% 24.3% 16.5%
FTSE Japan -10.7% 32.1% -0.6% 26.6% 12.7%

Past performance is not a guide to the future. Source: *Lipper IM to 30/04/2018.

This follows a number of years of more subdued performance. Investors have tended to ignore the out-of-favour companies the managers look for, preferring the perceived security of larger companies with more dependable earning streams.

The managers believe the latter type of company is overvalued in many cases and they don’t think the prospects for these companies justify such high share prices.

The managers have an impressive longer-term track record. An investment of £10,000 made 10 years ago would now be worth more than £23,968*. But you should remember past performance is not a guide to future returns.

Please note the fund carries a performance fee and as it is an offshore fund you are not normally entitled to compensation through the UK Financial Services Compensation Scheme. If you are considering an investment please ensure you read the fund's Key Investor Information Document which contains further details.

Please read the Key Features/ Key Investor Information in addition to the information above.

Find out more about this fund including charges

Important information - Please remember the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. This article is provided to help you make your own investment decisions, it is not advice. If you are unsure of the suitability of an investment for your circumstances please seek advice. No news or research item is a personal recommendation to deal.


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