Japan has been a bright spot for Asian equity investors since corporate governance reforms started to gain traction in 2023.
After a breakout year in 2023, the Japanese equity market continued its run with the TOPIX finishing the year 2024 up some 20% in local currency terms.
However due to the continued weakening of the Japanese Yen, US dollar-based investors were up only 8% for the year.
The Japanese yen declined over 10% during 2024 against the US dollar as the interest rate disparity continues to remain at wide levels.
The US Federal Reserve finished the year with interest rates at 4.5% compared with the Bank of Japan, which started the year with negative interest rates, and finished 2024 at 0.25%.
With this backdrop, some hedged active equity strategies have delivered gains well above their peers and the broader index.
Below are five top performing Japanese equity funds of 2024, according to data from FE fundinfo*.
Dekaloc Quality PrivilEdge – Alpha Japan
The Dekaloc Quality PrivilEdge – Alpha Japan fund delivered 31.4% in 2024, well above its peers and the broader TOPIX index.
The PrivilEdge – Alpha Japan fund is actively managed by Alpha Japan Asset Advisors and has a high conviction, concentrated investment approach.
The portfolio invests in around 55-80 stocks with the top 10 positions representing 30-40% of assets.
WisdomTree Japan Hedged Equity
The WisdomTree Japan Hedged Equity fund delivered 30.2% in 2024, also well above its peers and the broader market.
This fund provides exposure to Japanese-listed companies with an exporter tilt, companies that derive less than 80% of their revenue from sources in Japan.
Its designed to provide exposure to Japanese equity markets while hedging against fluctuations in the Japanese yen relative to the US dollar with currency hedges.
BOCIP Japan Small & Mid Cap Opportunity
The BOCIP Japan Small & Mid Cap Opportunity fund delivered a 28.8% return in 2024, well above the TOPIX return as well as the 4.8% return from the MSCI Japan Small Cap index.
This fund is managed by BOCI-Prudential Asset Management Limited, a joint venture between Bank of China and Prudential.
It invests in the stocks whose market capitalisation form the bottom half of total market capitalisation in Japan.
iShares MSCI Japan USD Hedged UCITS ETF
The iShares MSCI Japan USD Hedged UCITS ETF was another hedged product that outperformed last year. It delivered a 25.6% return in 2024, far above the unhedged MSCI Japan index.
This passive ETF from BlackRock’s iShares business tracks the MSCI Japan 100% Hedged to USD Index, which given the US dollar’s recent strength proved to be a boost to performance.
The MSCI Japan index tracks the large and mid cap segments of the Japanese equity market.
GS Japan Equity Partners Portfolio
The GS Japan Equity Partners Portfolio was up 25.5% in 2024, one of the best performing actively managed large cap strategies in the list.
It is run by Goldman Sachs head of Japan Equity Ichiro Kosuge with a team of five investment professionals.
It runs a concentrated strategy with 37 holdings, where its largest 10 positions made up 46.6% of the portfolio at the end of 2024.
*The fund performance was measured in US dollar terms based on data from FE fundinfo. The funds were only those fall under the relevant Hong Kong SFC Authorised Mutual or Singapore Mutual sectors as classified by FE fundinfo.
