GLG Japan CoreAlpha moves to restrict inflows

"GLG's Japan CoreAlpha strategy has performed strongly over the last two years and has attracted significant new subscriptions," explains Richard Phillips, head of UK retail at Man (GLG's owner). "While the strategy remains manageable at its current size, liquidity in the Japanese equity market has fallen back again, and we have taken the decision to restrict inflows to protect existing investors from the risk that performance could become compromised."

From 13 October GLG will restrict trade size per client to £1m per day for each fund, but investors will be able to withdraw their money from both the UK and Dublin funds as normal. For private investors, making investments into an individual savings account (Isa) or self invested personal penson (Sipp) for example, there will not be much impact.

"In reality this is less of a closure, and more a case of controlling the volume of daily inflows by limiting large daily purchases of the fund from discretionary and institutional investors," says Jason Hollands, managing director at wealth adviser Tilney Bestinvest.

This limit may be adjusted if the management team and fund managers feel either that they need to reduce flows further or alternatively are able to accept increased investments if conditions change.

GLG Japan CoreAlpha has a strong historical performance record and has outperformed its index and sector peers over one year. However, over three and five years the unhedged retail share class has underperformed its benchmark and sector peers.

But Mr Hollands says: "The strategy, which has combined assets of £6.5bn, is squarely focused on large cap stocks which are pretty liquid given Japan is one of the largest developed markets, so at current levels the funds are manageable and this hasn't changed our very favourable view on the fund and the sterling hedged version, both of which we rate five stars."

Tilney Bestinvest counts GLG Japan CoreAlpha among its premier selection of top rated funds for reasons including a strong track record since launch and its manager's high conviction approach. "Manager Stephen Harker singles out large companies that he believes are trading below their 'correct' valuation, leading to a distinct large-cap value bias," adds Bestinvest. "His portfolio is fairly concentrated, usually comprising around 40 to 60 holdings and his style of investing can lead to aggressive sector and stock positions including contrarian calls, which can lead to volatility and periods of performance that are out of line with the market. While this might make for a rollercoaster of a ride, we believe potential growth prospects for the future are excellent."

GLG Japan Core Alpha's manager has achieved his outperformance primarily through stock selection. "Our analysis shows that 30 per cent of his outperformance is attributable to his investment style, whereas 70 per cent is attributable to his stock selection," says Laith Khalaf, senior analyst at Hargreaves Lansdown. "The significance of this is that investment styles can go in and out of fashion, whereas in our view stock selection is a skill which lasts for the long term."

This is not the first time the GLG Japan CoreAlpha funds have been soft closed. Following a reduction in liquidity in the Japanese equity market triggered by an earthquake in 2011, the funds were soft closed between March and December 2012.

But if you do want an alternative, consider Baillie Gifford Japan Trust (BGFD) which we also count among our IC Top 100 Funds. Baillie Gifford Japan Trust is well ahead of its benchmark, the Topix, over one, three and five years, as well as the Association of Investment Companies (AIC) Japan sector average over three and five years. It has an ongoing charge of 1.14 per cent, and trades on a premium to net asset value (NAV) of 2 per cent, although this is lower than its 12-month average.

This does not offer a hedged share class option, however.

See more Japan fund suggestions

Source: Morningstar & *GLG

Source: Morningstar, at at 1 October 2014

Top 10 holdings, as at 29 August 2014

Main sector exposures (%)