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Investment Times

Tokyo drift

| 27 February 2015 | A A A
Tokyo drift

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Despite several recent periods of stronger performance, and stock market growth of 89% since the financial crisis, Japan remains one of the most attractively valued developed equity markets. The economic background in Japan is improving, and recent events suggest the future is bright.

As a resource-poor country, Japan relies heavily on importing oil. The recent collapse of the oil price has had a positive effect on the economy, and helped businesses lower costs.

This, along with increased quantitative easing and a delayed increase to consumption tax, has provided a positive operating environment for Japanese businesses, and company profits have been growing. This is expected to lead to wage growth in 2015 which, along with savings at the petrol pump, could result in more disposable income for Japanese consumers. We believe this, when combined with government reforms, could prove to be the spark needed to ignite a sustainable period of growth for Japanese companies.

No recommendation

No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

In our view Andrew Rose, manager of the Schroder Tokyo fund, is set to take advantage of this opportunity. His approach involves discovering undervalued companies and investing in those where a catalyst could cause the share price to rise. He currently has a bias towards retail, transport and electrical component businesses: likely beneficiaries of lower energy costs and growing consumer spending. The fund also has exposure to higher risk smaller companies.

Our verdict

The manager’s relatively conservative approach has served the fund well and this is one of our favoured funds for long-term, core exposure to Japan. The fund has produced consistent returns and outperformed the IA (formerly IMA) Japan sector and the Topix index by around 10% over the past five years, although past performance is not a guide to future returns and like all stock market investments it will fall as well as rise in value. Please note currency movements will also affect returns for UK investors. We believe this fund could be an excellent way to benefit from any further recovery in Japan’s stock market.

Annual performance Feb 10
-Feb 11
Feb 11
-Feb 12
Feb 12
-Feb 13
Feb 13
-Feb 14
Feb 14
-Feb 15
Schroder Tokyo 14.4% -1.3% 3.4% 13.2% 15.2%

Please remember past performance is not a guide to future returns.

Schroder Tokyo Fund

Fund manager's initial charge 0.00%
HL saving on initial charge 0.00%
Net initial charge 0.00%
Dealing charge Free
Ongoing charge (OCF/TER) 0.92%
Ongoing saving from HL 0.25%
Net ongoing charge 0.67%

The charge to hold funds in the Vantage Service is 0.45%. Where savings are paid as loyalty bonus, they may be subject to tax in the Fund & Share Account.

View our charges

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.

The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website is not personal advice based on your circumstances. So you can make informed decisions for yourself we aim to provide you with the best information, best service and best prices. If you are unsure about the suitability of an investment please contact us for advice.