Mam’s move to snap up Japanese equities pays off
Mr Sullivan is co-manager on the group’s £784m CF Miton Special Situations and £225.1m CF Miton Strategic funds with Martin Gray.
The manager said both the funds had roughly 7 per cent of their portfolios in Japanese equities as at last week, made up of holdings in the Morant Wright Japan fund and the £1.2bn GLG Japan CoreAlpha fund, which were increased just before the turn of the year. The aggressive move made Japan the funds’ second-largest geographical weighting behind the UK.
In 2012 so far the Topix 100 index of the biggest Japanese companies has risen 14.7 per cent, providing a healthy boost to the Mam funds’ returns.
“The move has been enhancing from an equity perspective but we’re in this for a medium term investment and so have little interest in three-month moves,” said Mr Sullivan. “We are continuing to look at opportunities in this space.”
Mr Sullivan added that a large degree of the increase in Japanese equities had been funded by the reduction of a position in Japanese yen.
The managers first adopted a large exposure to the Japanese currency in 2007 and benefited as it strengthened relative to other global currencies over the period. However, the Bank of Japan (BoJ) has committed to loosening its monetary policy in recent months, in a manner that will increase the supply of the currency and hence risk devaluing it.
“The investment case for Japan is centered on the belief that the BoJ, against a deflationary headwind, will be the last of the world’s central banks to abandon loose monetary policy,” he said.
“The authorities would have learnt from past mistakes. A more pro-Japanese equity environment will be brought about by the current contrast in loose monetary policy in Japan compared with a tightening policy in the Asia excluding Japan region.”