Mutual Funds / Managed Investing: Japan's Been Hot, but Managers Stay Shy
For mutual fund managers who roam the world looking for values, Japan has been a nightmare.</br></br>By traditional measures such as price-earnings ratios, Japan's stock market has looked overvalued to fund managers for more than a year. So most managers have gradually cut their Japanese holdings. Some have even told fund holders that this was a prudent thing to do, given the risk of a "correction" or worse in the Japanese market.</br></br>But alas, most mutual funds have just walked away from a booming market.</br></br>Rather than being the first to crash, as U.S. investment professionals had feared, the Japanese market has soared 45% in dollar terms so far this year, according to Morgan Stanley Capital International Perspectives. It also has weathered the fall from the summer's peak with remarkable grace, slipping just 0.9% since Aug. 20. By comparison, the U.S. market through last Thursday is down 4.4% for the year and 30.2% below its peak.</br></br>Most money managers reluctantly concede that reducing their holdings in Japan might have been a bit premature and that their performance has hurt because of that move. Yet many remain nervous about the Tokyo market, and few are eager to increase their stakes in Japan.