Aberdeen Japan trust loses out despite mandate switch

Aberdeen Japan trust loses out despite mandate switch

The Aberdeen Japan Investment Trust has seen its return drop three times more than its peers in 12 months, marking a challenging second full year for its Japan-only mandate.

The £71m trust, which previously invested in the whole of Asia, changed its mandate in 2013 as it looked to benefit from the economic structural reform in Japan.

According to its results for the year ending 31 March, the net asset value (NAV) lost 6.2 per cent, compared to the benchmark Topix, which fell by 1.7 per cent.

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The underperformance was blamed mainly on a loss on the currency hedge in the first quarter of this year, when Brexit worries weakened sterling and the yen strengthened, despite negative interest rates.

Since 2013, the trust has delivered 22.7 per cent, just half of the 44.5 per cent return from the Japan equities sector, FE figures showed.

Japan, like the rest of Asia, faced considerable market turbulence during the year, but according to company chairman Neil Gaskell, confidence in the country was strong in the first half of the year.

“Numerous risks threaten to derail a still-frail world economy, and Japan will not be immune from the headwinds,” he said. “Divergent monetary policy is a source of uncertainty as more central bankers venture into the unfamiliar territory of negative interest rates.”

Despite this, Mr Gaskell said the board is confident about investing in Japan, committing to the country-specific mandate.

Scott Gallacher, chartered financial planner at Rowley Turton, said: “We tend to prefer wide mandate funds which give the manager a good degree of flexibility to identify the best investment opportunities.

“I’m always disappointed when funds or trusts fundamentally change their investment mandate, especially in a way that significantly narrows the mandate.

“Had the original investors wanted a specific Japanese investment then I’d argue they wouldn’t have invested in a general Asian trust.

Mr Gallacher said: “If you are going to make such a big call by changing the mandate you’d better deliver to your investors, which unfortunately doesn’t seem the case here.

“Investors need to consider whether they are happy with a Japanese trust in the first place and secondly whether or not there are better Japanese managers out there.”