An equity rout that wiped out 36 trillion yen ($330 billion) from Japan’s benchmark average over the past two weeks is presenting investors with an opportunity to buy before shares potentially rebound to levels unseen since 1990, according to a top-ranked fund.

Dejima Asset Management, whose Japan Synthetic Warrant Fund was last year’s best performer among 140 Japan-focused funds tracked by Eurekahedge Pte, is bullish on Japan because of a healthy global economy, low inflation and attractive corporate earnings. Japan’s stock market will also benefit from the Bank of Japan’s easy monetary policy, which is unlikely to end anytime soon given that inflation is low, according to the fund.“The selloff in Japanese stocks is a healthy correction,” said Matthew Lonergan, a London-based manager of the Japan Synthetic Warrant Fund. “We do not see this as the start of a long-term correction as the economic and corporate fundamentals are just too strong.”

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Dejima’s Japan Synthetic Warrant Fund (JSW) has been doing what it says on the tin and returning to investors warrant-like returns on the outperforming Japanese equity market. With the Japanese equity market up approximately 61% on a 12 month view since end of November 2012, JSW was up approximately 660% in its Yen Class of shares and 516% in its US Dollar Class of shares.

JSW is a warrant fund, the downside can be considerable such as in 2011 when the earthquake and tsunami engulfed northern Japan, the equity market fell almost 10% in March 2011 and almost 20% for the 2011 year, JSW was down almost 40% in March 2011 and approximately 75% in US Dollars and 77% in Yen for the year of 2011.
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Investors who put their money in Dejima Capital LLP’s warrant fund have been on a roller coaster ride of late.

The fund, Japan’s best-performing fund for 2015, plunged 25 percent on June 24 when the U.K. voted to leave the European Union, bringing its drop this year to 50 percent. The fund, whose moves amplify the Topix index’s performance, tends to fall about three times more than the benchmark when it declines and gain five to seven times when the index rises, Matthew Lonergan, who runs Japan Synthetic Warrant Fund with Trevor Sliwerski and Rowan Chaplin, said in an interview.

“We’ve got used to huge moves and we try not to get stressed out by them,” said Sliwerski. June was “one of the worst months” in a long time, he said.

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