Having previously been hit by swelling assets and subsequent mass redemptions, Polar Capital’s James Salter has clarified the soft-close limits for his Japan funds, Citywire Selector has learned.
The Citywire + rated market veteran has had a tough time with the Polar Capital Japan fund in recent years both in assets and performance. It dropped from a 2012 peak of $5 billion to below $1 billion before recovering over the past 18 months.
Following a strong 12-month period of returns, which has seen him outperform the Topix benchmark by eight percentage points, Salter is seeing renewed interest in the fund, but he is extremely cautious given the impact redemptions previously had on his performance.
‘The fund at the moment is $1.1 billion and I have said to all investors we would be capped at $1.5 billion, and we don’t this fund to be any bigger than that. One of the lessons I have learned is we need to control the size of the fund better than we did before and that is down to a bit of us and a bit of the investors,’ he said.
Rewinding to 2012, prior to Prime Minister Shinzo Abe coming to power, Salter said his then-top-performing fund was on a wide range of buy-lists and saw huge investor interest due to expectations of renewed Japanese growth under Abe.
However, the fund’s bottom-up and small-cap focus meant it did not flourish despite the onset of Abenomics, and he found himself off the pace in a rallying market, which led to a large level of redemptions.
‘People did – and do – buy funds off three- to five-year buy lists and we had an unbelievable track record, and it was a ‘once in a career’ environment then. People would be at $100 million prior to Abenomics and went to $500-600 million, so we soft-closed the fund.
‘We had got up to $2 billion when we soft-closed and then it still went to $5 billion from existing investor money. People making $70-80 million allocations were adding more and more and they couldn’t stop the inflows either.’
Salter said once the fund hits $1.5 billion it will ‘effectively hard-close’ to ensure existing shareholders do not repeat their increased allocations as before.
On a one-year basis to the end of December 2017, the Polar Japan fund returned 30% in Japanese yen terms against a 22% rise by the Topix TR over the same timeframe.
Further information on how Salter has fared over the past three years is set to feature in the February edition of Citywire Selector magazine.