Fund manager Nishida's comments seem to mirror the thinking of many global money managers. The US is still the best place to invest. a .59% yield on a 5 year Japanese Govt note is really hard to accept for your return. Especially since the YEN has been weakening.
with Nishida saying
``Japan is by far the least attractive place to invest,'' you might think it was time to be doing some contrary thinking, but I don't know where the bottom is for Japan.
For posterity
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01/14 16:41
Bond Manager Nishida Invests Away From Home: Rates of Return
By Kanako Chiba
Tokyo, Jan. 15 (Bloomberg) -- Kokusai Asset Management Co.'s Masahiro Nishida, who runs Japan's biggest global bond and currency mutual fund, outperformed all rivals by staying away from home -- and he plans to keep it that way.
Nishida has more than 40 percent of his money in U.S. Treasuries, compared with 3 percent in Japan. The strategy helped his 510 billion yen ($3.86 billion) Global Sovereign Open Fund return 14 percent over the past year, the best performance of 55 funds from all over the world with similar objectives, according to Bloomberg data.
The bulk of those gains came as the dollar rallied 8 percent against the yen in the past three months. ``The U.S. is still the best place to invest,'' said Nishida, 41, who became a money manager after working for 13 years as a bond trader. ``The prospect for its economy is brighter than that of Europe or Japan.''
The fund returned 7.2 percent in the quarter ending in December, the best performance since 1998, Nishida said, and he expects to match that in the current quarter.
Japan has been trying to weaken its yen to lure overseas buyers to its goods as it battles its third recession in a decade. For investors, though, the decline may be reason to shun Japanese stocks and bonds and seek a haven elsewhere.
Sell Japan?
``Concerns of a financial crisis may lead to a `sell Japan' scenario for foreign investors,'' said Eiji Dohke, senior fixed- income strategist at UFJ Capital Markets Securities Co.
The Japanese may be reacting, too. They increased their holdings of U.S. government securities by $21.8 billion during October to $333.3 billion as the yen began to slip, the latest U.S. Treasury statistics showed.
They're also handing more business to Nishida and his Global Sovereign Open Fund. A doubling in its assets last year made it the largest global bond fund in Japan and the third largest of all mutual funds in the country, the company said.
``Every day, an additional 2 billion yen comes in,'' Nishida said.
Global bonds may also lure investors seeking a haven from a 19 percent decline in the Topix index of stocks in the past year, Those returns are also attractive compared to five-year Japanese note yields of 0.59 percent and interest rates on savings accounts that are even lower.
Because the fund makes a monthly payment, it's like a pension plan, which may also attract retired people, said Masataka Akiyama, a manger of the qualitative research department at Morningstar Japan K.K.
Monthly Payments
``With the slumping stock market, the fund's stable monthly distributions have been very attractive to individual investors,'' Akiyama said.
Nishida allocates 42 percent of his holdings to the U.S., mainly 10-year Treasury notes, and is considering buying more in coming months.
Further gains will probably come from currencies. The dollar will likely strengthen to 135 against the yen, from about 131.88 now, while 10-year Treasury yields will probably hold at about 5 percent, Nishida said. Japanese 10-year bonds yield 1.41 percent, by comparison.
``Not only is the currency weakening, but economic fundamentals are worsening,'' he said.
The Bank of Japan says business confidence in the nation dropped to a level not seen in almost three years. Japan's economy has contracted for a second quarter, international rating agencies cut the nation's credit grade, and tumbling bank stocks spurred concern the nation's financial system may deteriorate.
Economy
The recession has made it harder for companies to repay loans, putting the number of bankruptcies on track for a 17-year high and leaving banks with an estimated 150 trillion yen of loans that aren't being repaid.
Nishida has visited every country he invests in: the U.S., Germany, France, Italy, Belgium, Spain, Denmark, Sweden and the U.K.
Even the Sept. 11 terrorist attacks and subsequent anthrax scares won't damp his appetite for dollars and Treasuries.
The Federal Reserve is trying to spur growth by reducing its target for overnight bank lending, a benchmark for short-term interest rates, to 1.75 percent from 6.5 percent at the end of 2000.
Congress is debating a $100 billion package of tax cuts and spending increases. U.S. stocks have rallied in the past month, suggesting investors expect a rebound. The Dow Jones Industrial Average is up about 20 percent from its post-attack low on Sept. 21 and the Nasdaq Composite Index has climbed about 42 percent.
``The Federal Reserve's aggressive rate cuts and the government's stimulus packages have spurred optimism for the U.S. economy,'' Nishida said.
Nishida's used to traveling for the best deals. On vacation, he flies to ski in the powder of Hokkaido, the northernmost island of Japan, rather than driving to Mt. Fuji.
That's why, even if he's staying in Japan to ski, he's putting his fund's money abroad. ``Japan is by far the least attractive place to invest,'' Nishida said. |
