By Ruth Alexander Five Japan investment funds have lost their ratings from Standard & Poor's afte...
By Ruth Alexander
Five Japan investment funds have lost their ratings from Standard & Poor's after failing to meet the quantitative screen used by the ratings group. The funds included Newton Japan, HSBC Japan Growth, Five Arrows Japan and the offshore portfolios HSBC GIF Japanese Equity fund and Newton UGF Japanese Equity.
In its 2001 review of Japanese funds, both onshore and off, the research group downgraded 12 funds and upgraded only four.
As first reported in Investment Week, three AAA-rated funds were downgraded. The Baillie Gifford Japanese fund has fallen to a single A rating while Martin Currie Japan and its offshore, GF Japan, both managed by Michael Thomas, are now down to AA.
Baillie Gifford's fund, managed by Hamish Dingwall, has returned -28.1% over the year to 2 May 2001 and is ranked 54 out of 76 funds in the Japan sector. Over three months, the fund has returned 5.6% and is ranked 24 out of 83 funds.
Although Dingwall has been involved in the running of the fund for five years, its main fund manager, George Veitch, retired at the end of April this year.
The Martin Currie Japan fund is ranked 14 and returned -18.8% over the year to 2 May. Over three months it has risen to 11 in the sector, returning 7.2%.
The offshore trust, Scudder Global Opportunities Japan, has moved up a rating to AAA. Within the Japanese Smaller companies sector, Invesco GT's offshore Nippon Enterprise fund has been awarded AAA status. This gives Invesco four Japanese trusts in the smaller companies area with AAA ratings, including the Invesco Perpetual Japanese Smaller Companies fund.
Four funds moved up to AA, while a further six funds passed the qualitative and quantitative screen for either a restored or first time rating this year.
In the smaller companies universe, Mercury Selected Trust Japan Oportunities fund, part of Merrill Lynch's offshore range, has been moved up a rating band to AA.
Linda-Jane Coffin, director and head of European Equity Research at S&P, said: "At first sight, underperformance by the sector average in both the mainstream and smaller company universes over the latest review period appears disappointing.
"However, our report shows that on a five-year view, encompassing highly volatile market conditions, the average fund manager investing in Japan has comfortably outpaced the relevant benchmark."
Guy Boden, associate director and a senior analyst on the Japan team at S&P, said that during the group's interviews with Japanese fund managers this year, he has identified two distinct schools of thought on future strategy.
He said: "More cautious managers are arguing for a fairly neutral sector strategy and the avoidance of any major stock bets. This is based on the perception that the Tokyo market is currently directionless with little prospect of a short-term rally.
"On the other hand, more optimistic managers are starting to unwind their defensive strategies and raise their tracking error. They believe the market may be close to its bottom and that there are a number of areas which offer attractive value."
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