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F&C Japan desk gets vote of confidence

11th March 2010 Print

Foreign & Colonial Investment Trust (FCIT) has brought management of its Japan portfolio back in-house to F&C Investments, almost five years after outsourcing it to Goldman Sachs Asset Management (GSAM).

At the time of the outsource deal in 2005, F&C's Japan desk had performed poorly for some time and FCIT manager Jeremy Tigue took the decision to place the portfolio with quantitative manager GSAM. But with the in-house team now ahead of the sector median performance over one, three and five years, Tigue has decided to switch the portfolio back to F&C to take advantage of the greater flexibility offered by an active investment management approach.

Although still broadly negative in his view of Japan, Tigue said: "The point is that after 20 years of underperformance, at some stage Japan will have some good performance, and by making this change we're more likely to be able to spot this and do something about it." 

Head of Japanese equities Jamie Jenkins joined F&C in 2004 following the merger with ISIS Asset Management, and was promoted to his current role in early 2007. He heads a team of three, working alongside fund managers Stefan Bain, who joined F&C in 2007, and Mark Perrin, who moved on to the Japan desk in 2006 having previously worked in the Pacific Equities team. 

The Japan team are high-conviction stockpickers, focused on creating portfolios of ‘best ideas' drawn from the 4,000 or so companies listed in Japan. The managers use a thematic approach to pinpoint key medium-term investment opportunities, and strive to identify where the market consensus is wrong, either through mispricing a company in relation to its earnings outlook or incorrectly forecasting those earnings. 

Jenkins said: "As a market, Japan offers large inefficiencies for stockpickers to exploit, and we fully intend to do just that on behalf of FCIT." He points out that Japan is the largest, most diversified market in Asia, with world-class companies in a variety of sectors, and is increasingly geared into growth in the emerging markets of Asia, with exports from Japan to the rest of Asia now totalling more than exports to the US. 

In addition, the structural underweight of many global funds towards Japan shows some signs of unwinding, which Jenkins said could have a "huge positive impact" on the Japanese stockmarket if this trend gathers pace. 

Although Japan is popularly perceived as having been in the doldrums since the market crash of 1989, Jenkins said the market has actually performed better than people think, moving in line with global indices since 1999. This makes for an attractive risk/reward profile at this point in the cycle, he added.   Jenkins concluded: "We are a stable and very enthusiastic team who have what we think is a sound investment process. We are committed to Japan and we think we can add a lot of value there."