Focusing on the substance of style – Harradine

Income funds look an increasingly attractive way to play Japan, says Andrew Harradine, head of mutual fund selection at EFG Asset Management.

Focusing on the substance of style – Harradine


“It has been such a low yielding region for so long that income hasn’t really been on the radar for investors. But, there are a few funds out there and if managers can find there right stocks there are opportunities,” he said.

“While dividend yields are relatively low in Japan relative to other regions I think there will be increasing focus on income type stocks in Japan given the significant decline in JGB yields and the hunt for alternative sources of yield. Secondly, management emphasis on shareholders returns is increasing under Abe reforms which bodes well for dividend growth,” he said.

In this space, Harradine likes the Coupland Cardiff Japan Income and Growth Fund.

Style is also a consideration when selecting how to play the US and Europe at the moment, he said, largely as a result of the collapse in oil prices.

“One of the main catalysts has been the collapse in oil prices, “ he said, explaining, “we held value funds last year, but we are beginning to diversify into growth funds.”

The reason for this, he said, is that consumer stocks account for 27% of the US value index, with commodities making up 10%, whereas 40% of the stocks in the growth index are made up of stocks focused on the consumer, with only 5% exposed to commodities.

However, he says, unlike Japan, where the group’s portfolios are overweight, he is currently slightly underweight the US.

He does however, still like Europe and is overweight the region, but like in the US he has a growth bias.

This, is largely because value funds in the region tend to have a much higher exposure to the domestic economy and sectors like financials and energy.

At present, he likes the Allianz European Growth Fund, as his entry point into the region.

The other region Harradine is overweight is Asia ex-Japan, but here he says, many of the quality-focused managers are struggling for ideas, so he is exposed through the Macquarie Asia New Stars Fund.


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