The New Reformers

Shinzo Abe

A new dawn for Japan?

The first of our great reformers is Japanese Prime Minister Shinzo Abe. His policies, collectively known as ‘Abenomics’, offer Japan the opportunity to finally awaken from its two-decade economic malaise.

His plan to reignite the Japanese economy has aligned the interests of stockmarket investors, the central bank and the government like never before. The Neptune Japan Opportunities Fund, managed by Chris Taylor, has sought to exploit these developments from their inception.

These are Neptune’s views and forecasts, they are not a reliable indicator of future performance. References to specific stocks are for illustration purposes and are not a recommendation to buy or sell that stock. Neptune funds may be higher risk that other funds. If you are unsure of the suitability of any of the investments mentioned in this website you should speak to an authorised financial adviser.

Abe’s reforms are designed to pull Japan out of the longest bear market in history (30 years) and a 20-year deflationary spiral. The government has doubled its inflation target and taken measures to boost economic growth, including a quantitative easing programme that, in relative terms, is twelve times the size of the US initiative.

In December 2014 Abe’s Liberal Democratic Party-led coalition was re-elected with a two-thirds majority, giving him the mandate to complete the Abenomics programme. One consequence should be the continued devaluing of the Yen, as the government seeks to boost its tax take by increasing the taxable value of overseas corporate earnings via the currency exchange rate.

Japan’s Economy
3rd

Japan is still the world’s 3rd largest economy

2012-2014

Since December 2012, the Yen has declined by

–27.9%*

10mn

Vehicles made by Toyota annually

¥70bn

Boost to Toyota’s profits from the Yen’s depreciation between April — September 2014

*Source: Lipper as at 31.12.14. Yen value versus sterling. Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the original amount invested.

The Neptune Japan Opportunities Fund has always sought to focus on multinational firms that lead their global industries, like Toyota and Toshiba.

Chris Taylor, manager of the Neptune Japan Opportunities Fund

Neptune Japan Opportunities Fund: investing in beneficiaries of yen weakness

The Japanese companies we favour derive the majority of their revenue overseas, rather than from Japan, and have shifted most production to cheaper locations. Not only does this help increase their profit margins, but they also benefit from Yen weakness because of the amount of revenue earned in foreign currencies. When repatriated back to Japan, this will increase in value as the yen falls.

The companies we invest in are benefiting from a weaker yen, with the yen value of the Fund hedged — or offset — to protect sterling investors.

Other Japan funds may offer currency hedging, but the onus is usually on the investor to switch between share classes in order to protect equity gains against currency movements. In our Fund, the manager will remove the hedge when our analysis indicates that the yen has bottomed.

Hedging strategies can be riskier. In this case, if the yen were to increase in value then the investment could decrease in value. However, we strongly believe, given Abe’s determination to weaken the yen, that the hedge is crucial to protecting investors’ interests.


Japan and India – the reforms are real

These are Neptune’s views and forecasts, they are not a reliable indicator of future performance.

Neptune Japan Opportunities Fund

Cumulative Performance
1 Year3 Year5 YearUnder
Chris
Taylor		Since
Launch
Fund (%)20.6294.1073.57209.97344.50
TOPIX Index (%)18.4146.3048.2175.44117.79
InvAssoc Sector Average (%)17.7745.7451.1469.02111.78
Sector Ranking10/502/463/451/331/31
Quartile Ranking11111

Data as at 30.06.2015: Source: Lipper, A Acc Share Class. GBP

Discrete Performance
30/06/14
to
30/06/15		30/06/13
to
30/06/14		30/06/12
to
30/06/13		30/06/11
to
30/06/12		30/06/10
to
30/06/11
Fund (%)20.6216.7237.86–14.394.45
TOPIX Index (%)18.41–1.2225.08–3.795.30
InvAssoc Sector Average (%)17.77–1.5225.62–4.508.09
Sector Ranking10/501/472/4645/4540/45
Quartile Ranking11144

Data as at 30.06.2015: Source: Lipper, A Acc Share Class. GBP

Performance based on A Accumulation share class, InvAssoc Japan sector, in sterling with net income reinvested and no initial charges. The performance of other share classes may differ. Chris Taylor start date: 06.05.2005.

This Fund may be higher risk than other funds and past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the original amount invested.

Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the index quoted. For this reason the comparison index should be used for reference only.

Interested in potential growth from a resurgent Japanese economy?

Find out more about our Neptune Japan Opportunities Fund.
Visit neptunefunds.com

FE Crown Fund Rating 5/5
FE Alpha Manger 2014: Chris Taylor
Elite Fund: rated by FundCalibre.com

FE Crown Fund Rating applies to A Accumulation share class in pound sterling. FE Crown Fund Ratings do not constitute investment advice offered by FE and should not be used as the sole basis for making any investment decision. ©2015 FE.

The Elite Rating™ system is proprietary to FundCalibre Ltd, but should not be taken as a recommendation.