Huge flows into Japanese equities but losses for funds

Japan Japanese equities Bank of America blackrock BetaShares Platinum optimal

4 August 2020
| By Jassmyn |
image
image
expand image

Despite global flows into Japanese equity funds being positive for the 18th time over the past 22 weeks, there were no Japanese equity funds domiciled in Australia that had made a return since the beginning of the year.

Bank of America (BofA) data found that there were US$1.9 billion ($2.7 billion) in flows that went into Japanese equity funds last week, the second largest behind US equity ($4.8 billion).

Japanese equities also topped the charts when it came to the bank’s private clients in terms of flows over the past month. This was followed by precious metals, Treasury inflation-protected securities, municipal bonds and investment grade bonds.

 

According to FE Analytics, within the Australian Core Strategies universe, since the start of the year to 30 June, 2020, there were no Japanese equity funds that had made a return.

 

The best-performing fund was BlackRock iShares MSCI Japan ETF at a loss of 4.7%. This was followed by BetaShares WisdomTree Japan ETF Currency Hedged (-5.06%), Platinum Japan C (-11.45%), and Optimal Japan and Asia Trust S1 (-14.21%).

Platinum’s portfolio manager, Scott Gilchrist, said in the Japan fund’s quarterly report that the Japanese stockmarket had been falling for two and a half years.

“Disruption to business operations and markets is growing. COVID-19 has exposed this, and accelerated the changes in many cases,” he said.

“Half of the composition of the Japanese stock market has been listed in the last decade. This is not an outlier and will continue, as the old get sloughed off and the new rise. It’s tempting to think that the world will return to ’normal’, but it never has.

“These widespread and fundamental changes are broadly recognised and accepted as reflected in the valuations many are willing to pay for future growth and profits.”

He noted that corporate activism in Japan had been accelerating in recent years and there were abundant opportunities.

The Platinum fund’s largest sector exposures were to communication services (25%), health care (14%), consumer discretionary (11%), information technology (8%), and industrials (6%).

Performance of Japanese equity funds versus indices start of 2020 to 30 June 2020

Source: FE Analytics

Gilchrist said that the fund had been positioned both conservatively and with a view that the valuation dispersion would tighten.

“In the background is the influence of disruption and deflation. Unfortunately, positive contributions from fast-growing, innovative companies like Nexon (+38%), Nintendo (+15%), GMO Internet (+64%) and CyberAgent (+26%) have been offset by defensive positioning of a significant part of the portfolio and losses on short positions in companies, which were valued near record levels and rose to record levels,” he said.

Over the three years to 30 June, 2020, there were no Japanese equity funds domiciled in Australia that beat the MSCI Japan (21.6%) or the FTSE Japan (20.93%) indices.

The BlackRock fund was again the top performer at 19.56%, followed by the Platinum fund at 9.8%, BetaShares at 0.53%, and Optimal at -45.6%.

Performance of Japanese equity funds versus indices over three years to 30 June 2020

Source: FE Analytics

Read more about:

AUTHOR

Recommended for you

 
sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

 

MARKET INSIGHTS

PETER JOHNSTON- AIOFP

Well done Keith and Neil, these Canberra Bureaucrats need to be stopped. ...

6 hours ago
JOHN GILLIES

WHEN I RETIRED A LOT OF GUY'S WERE STILL PRACTICING FORMS OF COLD CALLING. There nothing wrong with it as a way of estab...

1 day 5 hours ago
JOHN GILLIES

I thought you joined a dealer to be protected and have a better version of regulation explained, BUT The dealers themsel...

1 day 6 hours ago

ASIC has cancelled the AFS licence of a Sydney wealth firm, the fifth Sydney firm to see a cancellation since the start of the year....

1 week 1 day ago

A former financial adviser has been banned by ASIC from providing financial services for inappropriate advice, among multiple breaches....

3 weeks 2 days ago

ASIC has suspended the AFS licence of a Melbourne fund manager responsible for six managed investment schemes....

2 weeks 2 days ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND