The Legg Mason Japan Equity Fund has been absolutely dreadful in the past year or
so and is, by some margin, the worst fund in the Japanese sector at the moment. The problem is, however, that at fairly regular periods in the past it has actually been by some margin the best fund in the sector. It is run by Hideo Shiozumi, and certainly seems to be experiencing one of those times when the manager has put the Hideo into ‘hideous’ for his investors.

The fund is quite focused in that it only holds around 45 stocks at any one time, and for the most part they tend to be smaller companies. A focused fund like this will magnify the returns either up or down. I have spoken to Legg Mason myself about the recent performance, as it does appear to be getting worse rather than better (it was down by more than 50 per cent in the last 12 months). This is a serious decline by any standards and will take a lot of work to remedy, yet the manager remains convinced that his portfolio is poised for a comeback – and with his previous record I wouldn’t like to bet that in 12 months’ time it won’t be the best-performing fund in the sector once more.

It is a real dilemma trying to decide whether to walk away from the fund and crystallise your losses to date, or dig in and wait for a recovery. By digging in, it is possible that further falls could occur. It has always been a high-risk fund, but this is no comfort when half your money has disappeared.

I have no idea why Legg Mason has failed to respond to your communication. When people want answers it is unnerving, to say the least, to be greeted with silence. Perhaps they owe it to everyone who is currently invested in the Japan Equity Fund to issue an update in a magazine such as this, especially considering they were more than happy to promote the fund when things were going well.