Detractors included Odelic and Endo Lighting, LED lighting makers, which fell on short-term earnings weakness, though the manager maintains their overweight positions, believing they will benefit from growth in energy saving in Japan.
Looking ahead, Mr Higaki suggests valuations are not stretched because earnings growth has accelerated. Of this year’s correction, he says: “The indiscriminate selling has created opportunities to invest in attractive businesses at a cheaper price.” Moreover, he is encouraged by the buoyancy of last year’s 54 initial public offerings (IPOs): “These new companies often have characteristics that we look for in our investment process – innovative business models that are changing existing business practices in their own areas and gaining share from the incumbent.”
EXPERT VIEW
Rob Morgan, pensions and investment analyst, Charles Stanley Direct
VERDICT
“The discount has narrowed substantially on this trust. It could have been bought at a discount of 20 per cent last year but is now at a less-interesting 10 per cent. With investor interest in Japan seemingly firmly reignited, this opportunity seems to have passed. In addition, the portfolio has shown some decent form recently in performance terms, harnessing the sharp rebound in the sector well. So shareholders are probably pretty happy with manager Shinji Higaki who was appointed in 2007. However, on the downside, the fees are expensive, and it is highly geared at 16 per cent so it will typically be a volatile ride.”
