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Lindsell Train may hedge Japan fund

Lindsell Train Investment Management is considering adding a sterling-hedged share class to its Japanese Equity fund and is winding up its second Japan fund.

The Japanese Equity fund is a long-only strategy, domiciled in Dublin and structured as an Oeic. The Japan fund, domiciled in the Cayman Islands, is unregulated and is structured as a hedge fund.

While Lindsell Train is winding up the hedge fund strategy, it has plans to further develop the Oeic. “We are refocusing on the long-only side of our business,” says Keith Wilson, the sales manager at Lindsell Train.

Wilson says investors are increasingly asking for a sterling-hedged share class for the Japanese Equity fund. “We are considering adding one,” Wilson says.

Japan funds generally have been out of favour for the past decade, largely because of poor per form ance. However, recent demand for sterling-hedged share classes in Japan funds suggests that investors have not abandoned the country altogether.

Other asset managers, including Dalton Strategic Partnership and JO Hambro Capital Management, have recently added sterling-hedged share classes to their Japan funds. Such share classes give investors access to the Japanese market, without having to take on currency risk associated with a strong yen.

Lindsell Train acquired the Japanese Equity fund – then called the Close Investments Japanese Equity fund – from Close Asset Management in 2009.
The ¥1 billion (£8m) fund typically holds a concentrated portfolio of 20-35 stocks.

Michael Lindsell, the founder and director, manages both funds. For the Japanese Equities fund he adopts a bottom-up investment style, screening for medium-term growth prospects, strong balance sheets and attractive valuations.

According to Trustnet, the Japanese Equity fund fell 30.5% over three years to February 24, compared with a fall of 25.1 per cent in the Japan Topix index.

Meanwhile, his Japan fund returned 13.2 per cent over three years to January 31, against a sector loss of 6.5 per cent. Over five years, the fund returned 98.4 per cent, compared with a sector loss of 35.2 per cent.

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