By MARCEL PORCHERON 27/10/2008
Stephen Harker is one of only a few Japanese equity managers who have been able to sustain outperformance of the Japanese equity market over the last three years. He draws on his experience of money management in Japan to position his portfolio aggressively in 'value' style stocks, especially in the large and mid caps, which he believes offer the best potential to outperform the Japanese market. The manager follows a mean reversion strategy where he sells stocks with high valuations in favour of lowly valued stocks. The portfolio’s sector positioning tends to be aggressive as a result.
This style of running money has proved to be very effective in Japan over the long run and Harker has a track record of outperforming in both rising and falling markets. Currently the manager is avoiding exposure to cyclical companies and stocks which sell into emerging markets. He is broadly focusing on companies in defensive sectors, financials (which are not exposed to the problems facing Western banks) and technology names.
Stephen Harker’s average monthly outperformance of more than 1% over the last fourteen years is exceptional relative to peer group and he has successfully adapted his portfolio positioning to suit different market conditions. With an MRI of 100% over 14 years and 97% over the last three years investors can have a high degree of confidence that Harker’s decision making is adding value and his recent strong performance is exceptional relative to his peer group who have largely struggled to cope with small cap underperformance and aggressive sector rotation. Investors should note that in the past the manager's style has led to short periods of sharp underperformance and for a core product this manager has displayed higher volatility than many peers.
Awarded 3 stars.