Apollo Multi Asset Management is maintaining its exposure to Japan despite the region lagging during the recent rally in equity markets.
The company is holding Japan through three funds – Neptune Japan opportunities, Legg Mason Japan and Melchior Japan.
Apollo fund manager Tom McGrath says Japan has always been a way to play the theme of a world recovery. He is committed to Neptune Japan opportunities, which has started to perform after a disappointing September, when it fell by 12.9 per cent.
McGrath says Neptune manager Chris Taylor has had the courage of his convictions and has been getting the macro-economic decisions right in the portfolio. Taylor expects the trends which have supported the appreciation of the yen since 2007 to reverse and has protected the portfolio from the risk of the currency depreciating by hedging its yen exposure back into sterling.
McGrath says: “Japan has lagged the recent rally but it often lags, so we might get it playing catch-up with other markets as the world economy recovers. We are starting to get the conviction that the markets have priced in a V-shaped recovery but they have not started to price in the end of quantitative easing.”
He believes this will change when global quantitative easing is reduced and money becomes less cheap following strong US third-quarter results but he is not sure if this will lead to a correction in equity markets or if the markets will push higher.