The Japanese Nikkei 225 index has finally surpassed its previous all-time high after more than three decades.
After roughly 30 years of stagnant returns, last year marked a major turnaround in corporate governance, materially higher foreign inflows and improving overall corporate profitability.
These changing conditions are reflected in its 2023 performance, where the Nikkei 225 managed to beat the S&P 500 index despite the strong performance of the Magnificent Seven. Year-to-date, this has continued, with the Nikkei 225 up 17.2% compared to 6.5% for the S&P 500.
However, only a handful of actively managed Japanese equity funds available for distribution in Hong Kong and Singapore have managed to match the pace of the Japanese Nikkei 225 index year-to-date.
Below are 10 of the top-performing Japanese funds so far in 2024 that are available for distribution in Hong Kong and/or Singapore, based on data from FE fundinfo*.
| Fund | Returns YTD (%) |
| SPARX Japan | 18.05 |
| Franklin Japan | 17.57 |
| iShares Core Nikkei 225 ETF | 17.27 |
| Nomura Nikkei 225 Exchange Traded | 17.25 |
| iShares Nikkei 225 UCITS ETF | 17.17 |
| Xtrackers Nikkei 225 UCITS ETF | 16.84 |
| E.I.Sturdza Nippon Growth | 15.55 |
| AXA Rosbrg Japan Equity | 15.17 |
| M&G (Lux) Japan | 15 |
| MS INVF Japanese Equity | 14.85 |
Among the top 10 performing Japanese equity funds, almost half were passive exchange-traded-funds (ETFs) tracking the Nikkei 225 index.
From the list above, only two actively managed funds are outpacing the index year-to-date: SPARX Japan and Franklin Japan.
The SPARX Japan fund is managed by Masakazu Takeda, who runs a quality-growth investment style approach. The highly concentrated fund has just 25 positions and its top-10 account for almost 60% of the portfolio.
Its biggest contributors to performance during the first month of the year were its positions in machinery manufacturer Hitachi, fabless semiconductor custom SoC vendor Socionext and Mitsubishi UFJ Financial Group.
Over the past year, the fund is up 46.3% compared to a 37.2% from its benchmark the TSE TOPIX index and well above its peer group average of 21.6%.
The Franklin Japan fund is managed by Ferdinand Cheuk and Chen Hsung Khoo, who follow a growth at reasonable price investment style approach.
This fund also has a fairly high concentration, with just 36 holdings in the portfolio. However, its top 10 account for just over a third of the strategy and its largest position has a 5.74% weighting, whereas the largest stock in the Nikkei 225, Fast Retailing Co, accounts for almost 11%.
Its two largest positions, Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group, have both rallied significantly year-to-date and have been major drivers of its recent performance.
Although the fund is outperforming year-to-date, over the past year it is slightly lagging its benchmark, the TSE TOPIX index return, at 36.94% versus 37.2%. However, it is outperforming its peer group average.
ETFs tracking the Nikkei 225 index offered by BlackRock’s iShares, Nomura and Xtrackers were among the top-performing funds year-to-date.
*The top-performing Japanese equity funds were measured in JPY terms over the period ending 27/2/2024 based on data from FE fundinfo. The data only includes funds that fall under the Hong Kong SFC Authorised Mutual or Singapore Mutual Japan sector in the FE analytics platform. Only JPY denominated funds were considered. Small-cap and currency hedged funds were excluded.
