iShares Japan Equity Index: May 2020 fund update

Dominic Rowles | Tue 26 May 2020

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• BlackRock is a pioneer in index investing and has a great record of managing tracker funds
• We view this fund as a good option to get access to a broad spread of Japanese companies
• It's one of the lowest-cost ways to invest in Japan – this could help the fund track its index closely
• This fund is on our Wealth 50 list of funds chosen by our analysts for their long-term potential

How it fits in a portfolio

This fund is an easy way to invest in a range of Japanese companies at low cost. It could be used to add diversification to a global equity portfolio designed to grow your money over the long term. It could also be a good addition to a portfolio of other tracker funds.

Manager

Kieran Doyle is a Senior Portfolio Manager in BlackRock's Institutional Index Equity Team. He's been part of the team since 2004 and currently named as this fund's manager, though the entire team helps to run the fund. The wider team, which is made up of over 50 people, is well-resourced and experienced in index investing. BlackRock has a long history of running index tracker funds, and previously acquired the firm that set up the industry's first tracker fund in 1971.

Process

This fund aims to track the performance of the broader Japanese stock market, as measured by the FTSE Japan Index. It's currently made up of over 500 companies, so there's plenty of diversification. Car makers, pharmaceutical companies and electronics are some of the biggest sectors in the Japanese market, so they form a large part of the fund. But it also invests in medium-sized and higher-risk smaller companies with lots of growth potential.

This fund invests in every company in the FTSE Japan Index and in the same proportion. This is called full replication and, by investing in every company, it could help the fund track the performance of the index closely. The fund can also lend some of its investments to others in exchange for a fee. This helps to keep costs lower.

Culture

The iShares brand represents BlackRock's family of index tracking and exchange-traded funds. The group is a pioneer in index investing and has remained committed to building this part of the business. Over the years the company has continued to innovate and now offers a large number of index tracking strategies covering a wide range of geographies, sectors, and markets.

As one of the world's largest asset managers, and with lots of resource and knowledge under its belt, it aims to continue to drive further development in this part of the investment market. Being such a large player in the index tracking arena gives BlackRock unique access to the marketplace, which can help reduce trading costs.

Cost

The fund is available for an annual ongoing charge of 0.08%. We think this is excellent value for a Japan tracker run by a provider we rate highly. Our platform charge of up to 0.45% per year also applies.

Performance

The fund has tracked the FTSE Japan Index well since launch in July 2005. It's tracked the index very closely over shorter periods, though over the long run it’s fallen behind the benchmark due to the costs involved. This is to be expected from an index tracker fund.

Given BlackRock's size, experience and expertise running index tracker funds, we expect the fund to continue to track the index well in future, though there are no guarantees how it will perform.

The five-year performance table below shows in some years the fund has tracked the index closer than others. On occasion it has even ended up slightly ahead of the index due to the strategies used by the team, although this won't necessarily happen in future and isn’t an aim of the fund.

Past performance is not a guide to the future. Source: Lipper IM to 30/04/2020.

More on iShares Japan Equity Index, including charges

iShares Japan Equity Index key investor information