In a recent survey of fund managers, a quarter said Japan is the most undervalued region in the world.At the start of this month, the Nikkei 225 was still more than 67 per cent off its high and I forecast that it will rise by 20 per cent or more over the next year. I believe that fast growing small and medium-sized companies relying more on the domestic market than the export market will be the most profitable investments. The fund I like best is M&G Japan smaller companies, which is one of only three Japanese unit trusts to make a profit for investors over five years to August 1, when it was up by 33 per cent. The fund manager is Kenichi Ura, who has an outstanding record. His success is a result of his ability to identify growth themes and pick stocks. He aims to invest in companies which have innovative products, a big market share and natural barriers to entry. I predict this fund will be the top performer across all sectors over the next year. It will certainly be well up compared with funds in most other sectors.