Mellon Global Investors is to launch a Japanese equity fund for the British retail market. The Mellon Japan Equity Value fund, open to institutional investors from November 30, will be available to retail customers from January 2007.
The fund, which has been outsourced to Mitsubishi UFJ Asset Management, is quantitatively managed. It aims to outperform the Topix by 2% a year, using a proprietary value model to identify relative value and market sentiment.
The model screens all the stocks in the Topix, of which there are about 1,300. From these, about 200 will make the portfolio. Mitsubishi’s strategy was developed in the 1990s and went live in Japan in early 2000.
It has more than $4.7bn (£2.5bn) in assets under strategy and more than 3,000 Japanese clients. The Mellon Japan Equity Value fund is one of the first funds to bring this strategy to investors outside Japan.
Andrew Jenner, director, head of investment at Mitsubishi UFJ Asset Management UK, is manager of the fund. “This is one of the first times the group has distributed funds outside Japan,” he says.
“We are trying to raise our profile on a global basis. We are struggling to grow in Japan [because] we are so dominant. We run $71bn in Japanese equities in Japan and this is the first year we have launched outside.”
Because the fund is run using Mitsubishi’s quant strategy, which screens the entire Topix, there are no sector or size biases.
It identifies value by looking at book value, cost of capital and consensus earnings estimates, Jenner says. “They are the three things we focus on. The aim of the model is to identify stocks with the best value,” he explains.
“We take limited sector and size risk. For the past five calendar years [the Mitsubishi quant strategy] has outperformed the Topix. That is one of the reasons Mellon picked up on it.”
As well as distributing funds for Mellon, Mitsubishi UFJ Asset Management distributes funds for other groups.
The initial charge on the Mellon Japan Equity Value fund is 5% and the annual charge is 2%.