Liontrust Japan Opportunities Fund

Q4 2019 review

The Liontrust Japan Opportunities Fund returned 8.5%* over the fourth quarter, significantly outperforming the TOPIX Index and IA Japan sector average return of 2%. This performance places the Fund came in 3rd out of 72 funds in sector for the quarter. The c.7% depreciation of the yen meant the Funds currency hedge back into sterling lifted the Fund’s gain by 7%. This depreciation in the currency can be attributed to being the main cause of the Fund’s outperformance over the period.

 

Market Overview

 

Overall, smaller firms on average outpaced the broad market, with the exception of the ultra-speculative Mothers Market. The largest 30 stocks achieved an almost 10% return, meaning that the mid-sized stocks did worst, but only marginally so. The TOPIX, in line with the rest of the world’s markets, initially slipped lower as investors feared further disruption to oil supplies in the Gulf region after Iran’s missile attack upon Saudi.

 

In the event, crude oil prices fell back from their late mid-September $70 peak just after the attack, to their previous levels, showing the beneficial impact of US Shale oil supplies finding their way onto the global market. Given these fears proved largely baseless, the markets recovered their poise across the remainder of the quarter. In addition, the worst effects of October’s domestic Japan VAT rise from 8% to 10% seem to have been shrugged off, so the TOPIX Index bottomed at around 1,570 before climbing steadily higher over the quarter to hit a high of almost 1,750 near the month end, but finally finishing the year at 1,721.

 

Portfolio Attribution

 

The Fund’s underlying equity portfolio showed remarkably divergent performance across individual stocks within each sector rather than major differences between sectors. For instance, in the materials sector, Toray fell by almost -7.5%, whilst Mitsubishi Gas Chemical rose by over 16%. Similarly, industrials saw Keyence, a hi-tech specialist manufacturer of automation products and systems gain 15% against most other stocks in that sector which remained almost unchanged.

Outlook

 

In the short term, we expect the market to remain stable although sentiment could remain fragile. 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 and the New Year should see that confirmed by better than expected company results announcements.

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

 

 

Dec-19

Dec-18

Dec-17

Dec-16

Dec-15

Liontrust Japan Opportunities C Acc GBP

20.7

-24.1

26.9

2.6

-2.2

Topix

15.8

-8.6

15.6

23.4

18.2

IA Japan

17.2

-11.4

17.9

23.3

15.7

Quartile

1

4

1

4

4

 

*Source: Financial Express, as at 31.12.2019, total return (net of fees and income reinvested)

 

**Source: Financial Express, as at 31.12.2019, total return (net of fees and income reinvested)


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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.

Disclaimer

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.

Friday, January 24, 2020, 10:20 AM