Hideo Shiozumi’s fund beat industry favourites such as Invesco Perpetual High Income and Newton Asian Income to the number-one spot, building on its strong showing in February when it came seventh on the list.
Japan has had a renaissance in recent months, leading the rally in developed global equities by some distance.
Our data shows that IMA Japan and IMA Japanese Smaller Companies are the two best-performing sectors over six months, with returns of 35.92 and 40.9 per cent, respectively.
The third-best performer is IMA Asia Pacific inc Japan, with returns of 22.67 per cent.
After nearly two decades of crippling deflation, the new government’s plan to raise inflation via monetary stimulus has been met positively by markets. However, certain funds have benefited more than others.
Legg Mason Japan Equity is up an incredible 67.32 per cent over six months, and almost 100 per cent over the last year.
It is also number-one in its sector over three and five years, with returns of 150.9 and 167.37 per cent, respectively.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
No fund in the entire IMA unit trust and OEIC universe has returned more over one or three years, and only Alex Wright’s Fidelity UK Smaller Companies fund has returned more over five.
Shiozumi tends to perform well during rising markets, but his portfolio is highly volatile and has consistently lost more during down periods.
It was one of the worst-performing funds in its sector in the falling markets of 2006, 2007 and 2008, according to FE data.
This has resulted in the fund having the highest annualised volatility scores in the sector over five years, at 23.83 per cent.
Although it sits in the IMA Japan sector, the fund has a small cap domestic focus, which the manager says is unusual for his peer group.
"We are seeing a shift from manufacturing to services in Japan," he explained. "Most of our competitors rely on the performance of exports, but the domestic industries are growing very quickly."
The manager particularly likes internet companies, which make up a hefty chunk of his portfolio.
FE data confirms that the fund has seen a big spike in popularity of late.
Legg Mason Japan Equity has grown from £60m to £135m since the turn of the year, making it one of the bestselling funds in the entire IMA unit trust and OEIC universe over the period.
It requires a minimum investment of £3,000 and has an ongoing charges fee (OCF) of 1.96 per cent.
Andy Parsons (pictured), head of investment research at The Share Centre, says he likes Shiozumi’s high-conviction style.
"The Legg Mason Japan Equity fund has become a regular feature in the top-10 and in March it climbed seven places to the top spot," he said. "In recent years, many investors have wondered whether the start of a new year would bring the resurgence to Japan that many had hoped for."
"The strong start to 2013 and various financial measures undertaken by the central government and bank may finally provide some real optimism for investors."
"The fund has a highly concentrated and conviction-led approach, currently having only 44 holdings, focusing on the domestic and internal consumer angle with the sector focus of healthcare, information technology, consumer discretionary and industrials."
Top-10 bestselling funds in March
Source: The Share Centre
"Dropping two places to the third most popular fund was the Newton Asian Income fund, managed by the highly impressive Jason Pidcock."
"Having firmly established itself within the top-10, this fund shows investor appetite for risk remains and that there is a strong acceptance that there are a number of very strong and exciting income investment opportunities outside of the UK shorelines."
"This fund is currently yielding around 4.24 per cent."
"In fourth position was the stalwart of the UK equity income sector and a fund that generally features in most investors’ portfolios – the Invesco Perpetual High Income fund."
"This fund needs little or no introduction, with Neil Woodford continually demonstrating his proven ability to successfully deliver consistent returns."
First State has the highest number of funds in the top-10, with three. Schroder Asian Income Maximiser, Jupiter Global Managed and Terry Smith’s Fundsmith Equity portfolio also made it this time around, having missed out in February.