The new sterling-hedged share class has been launched to protect investors from currency volatility between the yen and sterling by offering local currency access to the Japanese equity market.
The Japanese Equity Growth fund has been administered by Sumitomo Mitsui Trust Bank, Standard Life Investments’ strategic alliance partner, since October 2010.
Management duties are handled by Shigeru Oshita, who has 25 years’ experience in the market and draws upon stock analysis from a team of 26 analysts.
According to Standard Life Investments, since Sumitomo Mitsui Trust Bank took charge of the fund it has returned 25.93 per cent, versus the IMA Japan sector average of 21.19 per cent.
The past 18 months have seen hedged Japan funds outperform due to the depreciation of the yen. Japanese equities were one of the success stories of 2013, but a year after the Bank of Japan introduced a record stimulus the market has started to weaken amid talk of a sell-off.
In 2013 the introduction of ‘Abenomics’ saw the MSCI Japan index climb 24.8 per cent, although in the first three months of this year the index recorded a loss 7.29 per cent loss.
But despite the overall market having dipped in the first quarter, more than half the IMA Japan sector has outperformed the index, with many of the better performers being those that struggled in 2013.
REACTIONS
Provider view
Jacqueline Lowe (pictured), head of UK wholesale business at Standard Life Investments, said: “This is an exciting development for investors in our Japanese Equity Growth Fund.
“We have engaged with clients and leveraged on our experience of running hedged share classes on our Sicav range of funds.
“Although we have no imminent plans to launch additional hedged share classes on our UK mutual fund range, we would not rule this out in future. “As a leading asset manager, we are committed to offering our investors a wide and appropriate universe of investment solutions.”
Adviser view
Peter Wood, independent financial adviser at Surrey-based Lighthouse Wealth, said: “I think the decision to offer a sterling-hedged share class is a very wise decision. Hedging brings down currency risk, so Standard Life Investments is thinking the yen is not going much higher. European funds have benefited significantly over the last decade by not hedging.”
Charges
Retail investors are charged a 4 per cent initial fee, an annual management charge of 1.5 per cent and ongoing charges of 1.64 per cent.
Verdict
Given the current exchange rates between the yen and sterling, Standard Life Investments’ new share class should offer peace of mind to investors worried about significant currency risk.
But while that should appease some investors seeking exposure to Japanese stock markets, others may be hesitant to invest in a market that took a volatile twist at the beginning of the year.
In 2013 Japan was all the rage and that trend seems now to have passed, although that could provide investors with the opportunity to gain cheaper access if they are willing to stomach some volatility.
