Every week, we’ll profile a high yield investment fund that typically offers an annualized distribution of 6-10% or more. With the S&P 500 yielding less than 2%, many investors find it difficult to achieve the portfolio income necessary to meet their needs and goals. This report is designed to help address those concerns.
Japan is a country that’s been mired in an economic slump for decades. Despite keeping its benchmark interest rate at below 1% since 1995 and at 0% or below for more than a decade, GDP growth rates have struggled to consistently stay in positive territory. As a result, Japan has a largely stagnant economy and an enormous central bank balance sheet. Even as world central banks have tightened conditions considerably to combat high inflation, Japan has been one of the few to keep conditions as loose as possible to stimulate growth, potentially at the risk of igniting an inflationary spiral itself. Regardless, investing in Japanese equities has been mostly an exercise in futility for the past quarter century.
It’s impossible to tell if now is finally the right time to invest in Japan, but the Aberdeen Japan Equity Fund (JEQ) is one way to play it if you do. If you’re betting on an economic recovery in the region, this fund is tilted in a way that could allow it to outperform in such a scenario without overexposing shareholders to downside risk. Like other Japan funds, it’s struggled mightily since inception, but the way that it’s structured could be a differentiator if you believe it’s time to start overweighting.
Fund Background
JEQ is a bit of a black box. Its stated investment objective is simply to outperform over the long term on a total return basis the Tokyo Stock Price Index. How it goes about doing that is a bit of an unknown, but we do know from the most recent annual report that the portfolio consists of the stocks of companies with “quality management teams, strong market positions and resilient balance sheets”. It also discusses using a “bottom-up approach” and focusing on fundamentals. It also uses a modest amount of leverage in order to enhance yield and total return potential.
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