The fund aims to achieve a positive absolute return over the long term regardless of market conditions, by taking long and short positions primarily in equities or equity-related derivative contracts of companies having their registered office in Japan. Long positions may be held through a combination of direct investment and/or derivative instruments. Short positions will be held through derivative positions, primarily equity swaps and futures.

Shai Patel, co-founder of financial advice firm Generation Financial Services, reviews Gartmore's Japan Absolute Return fund.

'This absolute return fund launched by Gartmore at the end of January 2010 is attempting to deliver absolute returns (more than zero) over the long term, regardless of market conditions.

'Fund manager John Stewart has more than 18 years’ investment experience, including nine years successfully running a similar absolute return strategy at Gartmore. He hopes to achieve these returns by taking long and short positions primarily in equities or equity-related derivative contracts of companies having their registered office in Japan. The fund will typically have about 100 long and short positions, with a bias towards large-cap companies with a market cap of more than ¥100 billion (£680 million).

'There has been a wealth of absolute return funds that have been launched over the past few years, and choosing a market that has traditionally been erratic when it comes to consistent returns seems like a good idea.
Used properly, the ability to short certain stocks should be beneficial to the performance, as it should protect on the downside, but it needs to be done well.

'When it comes to managing Japanese equities and running absolute returns, Gartmore has a pretty strong record and, by building a well-diversified portfolio of stocks using the best ideas from the team at Gartmore, this fund should stand out from the crowd. Having said that, there are a couple of downsides.

'As a fund it’s a bit pricey, and a performance fee of 20 per cent in excess of the Bank of England base rate – which is currently 0.5 per cent – doesn’t help. More importantly, they do not hedge out the currency, which means your returns can be easily wiped out if the yen/pound rate moves against you (similarly, you could get further gains if the currency moves in your favour). In the past, the trend seems to be that the yen tends to move inversely to equity markets though so it is likely to be the first scenario.'