By MARCEL PORCHERON 19/03/2009
Robert Rowland has almost entirely destroyed his track record of outperformance of the Japanese index through recent poor performance. The damage was done mostly in the second half of 2008 after the manager had invested heavily in blue chip exporters, which he believed were high-quality firms that could emerge from a global slowdown as long-term winners in their respective industries. He was also underweight the more defensive areas of the market which performed relatively well. As the environment for Rowland’s stocks deteriorated by more than he expected, he failed to reposition his portfolio. This was further compounded by the strength of the Yen which had an adverse effect on the profitability of the export related companies that he held.
The fund has trailed the Topix index by 16% over 2008 and Rowland’s Bestinvest MRI has dropped to just 16% over both three and five years, while the manager has destroyed value for investors in his fund on a risk adjusted basis. As a result of Rowland’s poor decisions we have lost confidence in his abilities and can longer recommend that new money be invested into this fund.
The portfolio is still largely exposed to blue chip Japanese companies like the auto manufactures and Rowland remains underweight traditionally defensives stocks, since he believes that the bad news is now more than in the price of these companies. Existing holders should note that if the more cyclical parts of the market recover this fund should perform relatively well. It may also benefit from a weaker Yen, because of its exposure to exporters. Suitable alternatives to this fund include Andrew Rose’s Schroder Tokyo and SG Japan Core Alpha run by Stephen Harker, both of which are mostly invested in large cap stocks.