The Bank of Japan's large quantitative easing programme could cause the yen to weaken against other major currencies, providing Japanese export companies with a boost as their goods become more attractive to the rest of the world. Exporters could also benefit from the relative strength of the US economy as higher levels of disposable income create a greater demand for Japanese imports. In addition, Japanese companies have been growing profits and have been passing greater proportions of these profits to shareholders. These factors have led Paul Chesson and Tony Roberts, managers of the Invesco Perpetual Japan Fund, to form their positive outlook for the Japanese equity market.
The managers have focused the portfolio on economically-sensitive companies which could benefit from an improving economy, particularly the banking and manufacturing sectors. According to the managers, companies in these areas are undervalued by other investors and many have the potential to deliver robust earnings growth. The fund operates a concentrated portfolio which enables each holding to make a significant impact on returns although it also increases risk. The fund managers also have the flexibility to use derivatives which adds further risk.
Over the past two years, the fund has performed well, outperforming the rising stock market. Recently, a number of key stocks have boosted the fund's returns: Nintendo's share price rose strongly following the announcement it will allow its games to be offered on smartphones, while Japan Airlines positively contributed to performance as the company profited from a lower oil price and robust passenger demand. Elsewhere, Honda has detracted from the fund's performance - the share price suffered following a recall of a large number of cars due to airbag problems.
Paul Chesson has been lead manager on the fund since February 2000. Over his tenure, the fund has outperformed the IA Japan sector by 34.2%, rising 30.3% compared with a loss of 3.9% for the average fund in the sector.
Past performance is not a guide to future returns. Source: Lipper IM* to 01/05/2015
|Annual percentage growth|
| May 10 -
| May 11 -
| May 12 -
| May 13 -
| May 14 -
|Invesco Perpetual Japan||-13.52%||-11.81%||34.96%||-8.77%||29.05%|
Our view on this fund
The managers focus on economically-sensitive companies and adopt a contrarian approach, which means at times the performance of the fund can deviate significantly from the performance of the index and its peers in this adventurous sector. We feel their high conviction approach could deliver superior results over the long term and the fund retains its place on our Wealth 150 list of favourite funds across the major sectors.