Neptune Japan manager hedging back to sterling

Neptune’s Chris Taylor has started to hedge currency exposure on the Japan Opportunity’s fund from yen back to sterling, the company has confirmed.

Mick Gilligan, the head of research at Killik, says: “The fund manager thinks that it doesn’t look great for ­sterling but it looks even worse for ­the yen.”

Taylor’s fund was in the news as the best-performing fund in 2008, largely thanks to holding maximum cash positions and hedging the Topix. Over the past year to March 19 the £28m Japan Opportunities fund was up 52.2%. This compares with the Japan sector average fall of 8.2%, according to Financial Express.

It is also believed that the fund benefited from exposure to the yen which was strong towards the end of last year.
On the fund’s factsheet, Taylor is recorded as saying at the end of December 2008: “The yen’s appreciation protected sterling-based investors, conver- ting the Topix index’s loss of 20.9% in yen to a gain of approximately 14.8%.” Advisers say Taylor has made a good call on the currencies.

David Wynn, the investment director at RCM Bentley Jennison Financial Management, says: “I think it was a smart move.” However, he adds, changing a fund’s hedge can be dangerous because currencies are “risky and volatile”. He adds: “Sterling has been weak and volatile over the past three to five months.”

“At the moment we are not investing in the fund,” he says. “In the current ­economic environment we delegate these decisions to Neptune’s Global Equity fund because we currently don’t favour Japan.

“We think that the western world will recover before Japan. [Japan] is not a nation of investors but of savers.”

The fact sheet, dated February 2009, says: “The investment objective of Neptune Japan Opportunities Fund is to generate consistent capital growth by inves- ting, predominantly in a concentrated portfolio of Japanese securities with a view to attaining top quartile performance with the appropriate peer group.”

According to the fact sheet, 25.2% of the fund’s portfolio were held in consumer discretionary, 21.9% were held in cash, 19.5% in IT, 14.1% in industrials, 6.4% in materials, 6.2% in telecoms, 2.8% in consumer staples, 2.5% in financials and 1.4% in energy.