Four Japan funds well placed to share China's bounty

It's been a trying decade for many investors in Japan. None of the 36 funds investing in the country made any money for investors. But that could be about to change.

Over the last few years some funds have started to produce decent returns. So much so that several high-profile fund managers are now joining the action. Gartmore, for example, has launched a new Japan Absolute Return Fund. Meanwhile, managers at PSigma, Henderson, New Star, Skandia and GLG have all increased their exposure to Japan.

That's partly because, following rises in emerging markets and the stockmarkets of Britain, North America and Europe, "Japan is the one place that has not yet bounced back", says Nina Montagu-Smith in The Sunday Times. But now it "may finally hold out some promise for investors".

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A big attraction with Japan is its proximity to China. "Investors have chosen to ignore Japan's geographic location on the dragon's doorstep, which allows huge opportunities for Japanese companies to benefit from Asian growth," says Tom Becket, chief investment officer at PSigma, in The Sunday Telegraph.

And that's not the only reason to buy. Many of Japan's large companies have strong international brands and have been quick to restructure during the downturn. That leaves them with very little net debt and well positioned to produce strong earnings growth.

And many Japanese stocks trade below or barely above their book value. "Japan may have greater scope to rise from here than more fashionable emerging markets which are already priced for perfection," says Ian Cowie in The Sunday Telegraph.

So what should you buy? Tim Cockerill of wealth manager Ashcourt Rowan likes the GLG Japan Core Alpha Fund (tel: 020-7016-7000), as it focuses on key Japanese exporters. It has returned 65% to investors after charges (1.65% annually) over the last five years.

Mick Gilligan of Killik & Co likes the Neptune Japan Opportunities Fund (0800-587 5051), "one of the few Japanese funds to make money in 2008" albeit "thanks to its ability to hedge against market falls". But our preference is for investment trusts.

The Baillie Gifford Shin Nippon (LSE: BGS) trust has risen sharply since we tipped it less than a month ago, but the JPMorgan Japanese Investment Trust (LSE: JFJ) still trades on a discount of around 18%.