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Ruffer warns the easy gains have been made from Japan
by David Campbell on Aug 15, 2013 at 11:42
Ruffer Investment Company has reconfirmed its faith in Japan – by a wide margin the largest allocation and among the most long-running in the fund – but warned the easy gains have been made.
Fund managers Hamish Baillie (pictured) and Steve Russell pointed to the relatively muted response to prime minister Shinzo Abe’s capture of the upper house last month, perceived as an important endorsement of his economic strategy, as evidence the quick returns have already been handed over.
Since the win on July 21, the Nikkei 225 has slid 8% while the yen has gained 3.3% versus the dollar.
‘We should not be surprised that the election result was not met with the sort of jubilation that followed Abe’s election and the subsequent changes in the Bank of Japan,’ the managers wrote in their monthly update.
‘The pace of change in Japan is likely to be slower from hereon in but if Abe is successful then the investment opportunity is as appealing as it was before.’
‘With a solid victory (52% of the seats up for grabs taking his majority to 56%) his objective was achieved and Abe now has almost three years of uninterrupted government. This breathing space will be needed to put in place structural reforms, which, although necessary, will be unpopular; the increase in the sales tax being one such example.’
Japan has been a major driver of the fund’s 15.29% returns over the 12 months to the end of July.
Gold was also a surprise contribution to outperformance with direct holdings and sector equity added 0.6% to July’s 1.1% return.
‘Our equity portfolio added 1% to the month’s return. ITV rose 20% as the market endorsed efforts to make the business less reliant on advertising revenues. Invensys also rose 20% after a takeover approach from Schneider (Invensys has already sold its rail business to Siemens).’
In terms of security selection, the primary change was the exchange of Japanese consumer goods company Kao in the top five for Singapore telecoms business M1.
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