Best and worst

MANY fund managers switched round their Japanese investments this week following the devastating earthquake. Shares in domestic insurers fell while construction shares rose.

One of the big banks looking for an improved fund strategy this year is Sanwa. Chris Wheeler, head of marketing, said the fund had been pessimistic about market prospects at the start of last year. "We were 20 per cent invested in cash at the beginning of the year,'' he said, adding that other fund managers were more commercial about the recovery situation. "We were a little bit hesitant about going in to the smaller companies," he said.

Peter Jordan, Framlington Japanese fund manager, blamed its lack of performance on two factors: "We got the ratio of cyclical and growth stocks wrong. We were underweight in the smaller companies when they were rocketing ahead,'' he said.

The fund's performance was also held back by the fact that it was 11 per cent invested in other markets in the Far East such as Thailand, Hong Kong and Taiwan, all of which performed badly over the year.

Martin Harrison, GT managing director, said its fund performed well in 1992 and 1993, but was reconstructed to take advantage of what GT perceived would be the "new Japan". The benefits of the reconstruction has yet to feed through to the fund's perform

ance, he added.

Mr Harrison said: "The fund is going to benefit from the new Japan, which will bring a move away from the traditional companies." Among the companies in which the fund is invested is Autobacs, which sells cut-price motor parts, and Aoyama, a discount clothing house.

Mark Goodman, Prudential fund manager, said it made the right decision last year by being overweight in the cyclical stocks. It also had bigger holdings in blue chips and far less in financial shares. "We have just moved in to the more defensive stocks, such as Fuji,'' he said.