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MitonOptimal cuts global portfolio exposure to Japan

MitonOptimal is reviewing its exposure to Japan and has cut exposure to the region in its global portfolio, bringing it in line with the benchmark position.

The region is a long-term play in the firm’s portfolios despite growth being slower than expected.

MitonOptimal says there is a lot to be positive about in terms of a recovery within Japan’s domestic economy, with corporate restructuring and the change in presidency good from an investment point of view.

The firm believes that the biggest risks to Japan are external factors, largely the impact of the US. It says the impact of bad economic data coming out of the US is having a greater impact on Japanese indices than US indices, which it had not anticipated.

Fund manager Sam Liddle “I am reviewing Japan and my feelings are split. Recovery is on course but we are investing domestically across the market cap but mainly in large caps, not in companies that have an export focus. We are investing in defensive sectors such as water and utilities and also in technology.

“We have cut Japan in the global portfolio so it is more in line with the benchmark position but Japan stands out as a significant equity position in the strategic and special situations portfolios.”

With 169 different funds from 55 fund management groups represented across the Adviser Fund Index series following the rebalancing on November 1, the three AFIs have become even more diverse.

The AFI panellists did not shy away from making widespread changes to the underlying funds held within their portfolio recommendations at the rebalancing point.

Financial Express head of marketing and communication Paul Wynne says: “The latest rebalancing of the AFI has witnessed the highest churn rates yet.

“Compared with the last rebalancing in May 2006, the AFI Aggressive index alone has experienced a 32 per cent change in constituents, up from 24 per cent in May, while the AFI Balanced and AFI Cautious indices have experienced churn rates of 29 per cent and 25 per cent respectively.”

But while the panellists have selected a wider range of constituents for their portfolio recommendations, a relatively small number of funds dominate the overall weightings.

The table shows all funds that were chosen by the panellists more than five times as constituents across all three AFIs, ranking the funds by the number of choices.

Top of the list is Artemis European growth, which was chosen 16 times by the panellists to appear as an AFI constituent.

Invesco Perpetual high income, JP Morgan natural resources and Old Mutual corporate bond were each chosen six times.

While these 19 funds represent just 11 per cent of the different constituents appearing across the three AFIs, they make up 30 per cent of the Aggressive AFI, 39 per cent of the Balanced index and 39 per cent of the Cautious AFI by weighting.

The influence of the 20 best-backed funds within each index is even greater, representing 49 per cent, 45 per cent and 49 per cent of the Aggressive, Balanced and Cautious AFIs respectively.

The fact that all but two of the 19 funds in the table appear as constituents in each of the three AFIs suggests that many funds have the required characteristics to be held within port-folios with contrasting risk profiles.

Indeed, 53 of the 163 different AFI funds appear as constituent in all three indices.

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