With the Japanese stock market trading at 30-year highs, readers would be forgiven for thinking that fund managers would be jumping for joy too.
Sort of. The DFMs we cover have given all their love to one fund in particular this year: M&G Japan.
Our database shows the fund has had a stonking six new DFM buyers in 2023 and now sits just behind JPM Japan as the most popular pick for equities in the region.
This stat is all the more telling as managers have been largely hesitant of dipping their toes in the Nikkei and Topix this year, despite the market’s stellar performance.
As we’ve previously mentioned, DFM allocations to Japan have remained fairly static at between 3 and 4 per cent despite the Nikkei 225 surging by 25 per cent so far this year.
The evidence suggests DFMs are not alone in falling in love with this fund: it has gone from just £261mn in assets this time last year to £1.67bn now.
So what’s changed? Well, the fund is under relatively new management. Carl Vine and Dave Perrett took over in September 2019.
M&G Japan has outperformed the peer group in every year since coming under that duo’s management and perhaps because it has now passed the all-important three year benchmark, DFMs are starting to take notice.
The fund is up 9.9 per cent in 2023 and offered first quartile returns in 2022 and 2021 - long before this year’s market run, according to data from FEAnalytics.
James Saunders, Tatton’s head of portfolio management, is one of the allocators who recently bought the fund.
He says: “The {team running this fund} have a valuation sensitive approach which was important for us in this part of the portfolio. The process has delivered outperformance in differing market environments, in a reasonably consistent manner, after adjusting for their style biases. We like that the team has a history of actively engaging with their companies to some success, which in Japan is important.”
So at whose expense did this come? Well, until recently Japanese equities was one area where Baillie Gifford was holding strong among DFMs.
Not much longer. Baillie Gifford Japanese, which came into 2023 as the most popular fund in this sector in our database, has lost its crown after a couple of allocators headed for the exit over the past nine months.
Meanwhile Baillie Gifford Japanese Income Growth has seen one allocator sell up in 2023.
It remains a curiosity to us that Japanese equity allocations haven’t budged at all, but right now it's M&G Japan that are the gods of small things.
Joseph Wilkins is a freelance journalist
