Liontrust Japan Opportunities Fund

Q3 2019 review

The Liontrust Japan Opportunities Fund returned 4.6% versus the TOPIX Index’s gain of 6.5% and the IA Japan sector average return of 6.2%.

Market overview


Overall, the smaller and mid-sized firms, on average, outpaced the broad market, whilst the largest 30 lagged and the very small/more speculative area fared worst. The TOPIX Index, in line with the rest of the world’s markets, slipped lower during the first half of the quarter as fears built both of further disruption to global trade and also the likely consequent slowdown in economic growth. This saw a flight to quality in the US bond market where treasuries had their third best month on record during August, comparable only to the panics around the worst of the Credit Crunch and the Eurocrisis.


These fears proved overdone and markets recovered their composure during September with the TOPIX additionally shrugging off the negative implications of October’s domestic Japan VAT rise from 8% to 10%. The TOPIX bottomed in the low 1,460s before climbing back to 1,600 by the month end, and above its opening value of around 1,575.


Portfolio attribution


The Fund’s underlying equity portfolio collectively outperformed due principally to holdings in the materials, consumer discretionary, real estate and information technology sectors. Particularly strong contributions came from Nippon Paint (which bought the Dulux group) and Shin-etsu Chemicals. Haseko, the contract housebuilder, and both Mitsui Fudosan and Mitsubishi Estate, the commercial real estate developers, benefited from the buoyant Tokyo property market. Elsewhere Sumco, the silicon wafer supplier, and Fujitsu, the IT systems and hardware provider, climbed on an improving outlook for their core businesses.


By contrast, the Fund’s industrials and financials holdings turned in a more mixed performance as the heavy engineering firms did poorly, whilst construction rebounded and the financials were mostly unchanged. A 3% appreciation of the yen meant the Fund’s currency hedge impacted overall gains, this appreciation was the sole cause of the Fund’s underperformance during the third quarter.



In the short term, we expect the market to remain stable although sentiment could remain fragile unless there is a significant deterioration in US-China trade talks. Current economic news suggests that the world is passing through the low point of its recent slowdown, which should help the market recover. Likewise, an end seems to have come to the recent wave of downgrades to corporate earnings forecasts.

Discrete years' performance* (%), to previous quarter-end:








Liontrust Japan Opportunities C Acc






Topix Index






IA Japan












*Source: Morningstar as at 30.09.2019, on 17.10.2019.


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Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.


The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Wednesday, October 23, 2019, 9:27 AM