Around one-third of the 31 Japan funds monitored by S&P Capital IQ offered a hedged share class in 2012 compared to just under half at present.
Funds that have added a hedged share class includeIFDC’s Japan Dynamic Fund and the Lombard Odier Alpha Japan Fund, both of which were launched in January this year.
Hermes has also announced that it will be launching a hedged share class on its Japan Equity Fund this summer.
While devaluation of the yen has proved beneficial for the Japanese equity market, foreign investors holding Japanese equity funds with unhedged exposure have been subject to muted returns.
The Topix for example returned 31.5% in the six months until April this year in sterling terms, compared to 50% in yen.
The decline in the value of yen over the past six months is shown in the graph below.
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Last week we looked at the yen depreciation and what was needed to ensure long-term recovery of the Japanese economy.
Investors, meanwhile, are increasingly keen to commit capital to hedged share classes. Almost half of Polar Capital Japan Fund’s assets are in hedged share classes following subscription inflows into its US dollar hedged share class in the past few months.
Find out here which Japan funds have been the most popular year-to-date here.
