JAPAN IS AGAIN being talked up as an investment destination for 2011 and 2012 but South African investors have limited tools through which they can gain exposure to the region. While a number of local asset managers offer general Asian funds, one option that offers pure exposure to the region is the Stanlib Offshore Japan Fund, which is geared towards higher end, more sophisticated investors.
Investors can participate after a US$2 500 initial deposit, supported by a minimum of $1 000/month and the fund is benchmarked against the Tokyo Stock Exchange TOPIX total return index.
Looking at a five-year return on this fund is meaningless. In line with the broader Japanese index, the fund has lost half its value over the period. As the attached graph of the Nikkei shows, Japan has been a miserable place to invest over the past 20 years. Added to that, Japan’s economy – driven by exports – has been hurt by the strength of the yen against the US dollar, which reached a 15-year high.
However, Japan is gathering some support as signs emerge that the recession is fading into the past and industrialised nations are gaining some traction. Financial policy regulators in Japan have also indicated they’re quite prepared to actively enter the foreign exchange market to weaken the yen and make its exports more attractive. Those moves meant that in October 2010 offshore investors became net buyers of Japanese equities as they positioned themselves for a weaker currency.
The fund is well diversified, with no share comprising more than 4% of the portfolio. In terms of sectors, the fund has a leaning toward financial services and technology businesses. One aspect to keep in mind when considering this fund is the high potential upfront costs of 5% plus management fees of 1,3%.