Best and worst: Japan Unit Trusts

WILL 1994 be the year when the sun finally rises on Japan's long, dark recession? asks Caroline Merrell. Many fund managers believe that this year will bring the turning-point in a market that has performed appallingly over the past five years.

On average, pounds 100 placed five years ago in a unit trust invested in Japan would now be worth a paltry pounds 113.75 - an annual return of 2.7 per cent. Japan's economy has been in marked contrast to the other economies of the Far East, which have been booming over the past year.

Thornton runs one of the poorest performers in the sector in its Japan Growth fund - pounds 100 invested in this fund five years ago would now be worth pounds 72.24.

Caroline Bennett, fund manager at Thornton, said: 'We have been overweight in the electronics sector, which was particularly hit by the strength of the yen because it is export-related.' She added that the fund was weighted in the financial sector, which had been especially affected by the recession. She said Thornton was bullish about a Japanese turnaround and the fund was geared to take advantage of recovery.

David Chapman, products manager at Barclays Unicorn, said the company hoped to improve the performance of its unit trust by switching to the fund manager who manages its Japanese special situations fund. He added: 'The funds with a more general spread of investment have been hardest-hit.'

Clive Boothman, managing director of Schroder Unit Trusts, is cautious about Japan. 'The Japan smaller companies fund is incredibly volatile. It has a great record over five and ten years, but a couple of years ago it had a pretty awful time.'

He is more optimistic about the prospects for late next year. 'The Japan market is a long-term play.' He points out that many of the returns generated by investment in Japan funds have been created by the appreciation of the yen.

'The big question is, when are we going to see corporate earnings pick up?'

-------------------------------------------------------------------- JAPAN UNIT TRUSTS -------------------------------------------------------------------- The best pounds 1 Schroder Japanese Smaller Co's . . . . . . . . . . . . 221.34 2 Dunedin Japan Smaller Co's . . . . . . . . . . . . . . 216.23 3 Perpetual Japanese Growth . . . . . . . . . . . . . . .195.97 4 NM Japan Smaller Co's . . . . . . . . . . . . . . . . .154.92 5 Stewart Ivory Japan . . . . . . . . . . . . . . . . . .153.81 The worst 59 M&G Japan & General . . . . . . . . . . . . . . . . . . 79.95 60 Laurentian Japanese . . . . . . . . . . . . . . . . . . 79.49 61 Invesco Japan Performance . . . . . . . . . . . . . . . 78.33 62 Thornton Japan Growth . . . . . . . . . . . . . . . . . 72.24 63 Barclays Unicorn Japan & Gen . . . . . . . . . . . . . .58.51 -------------------------------------------------------------------- Chart shows value of pounds 100 invested over five years to December 27, offer to bid. Source: Micropal --------------------------------------------------------------------