The Martin Currie Pacific Trust, a UK-listed Asian fund, is cutting exposure to Japanese equities, believing there are better opportunities for growth across the Asian region outside of the country.

The fund’s management board said “there is a compelling case for retaining Japan” within the fund’s mandate but the “strategic weighting” will be cut, taking effect from the start of July.

The weighting reduction comes at a time when Japan’s prospects have taken a turn for the worse after the devastating March earthquake and associated damage to a number of nuclear power plants in the country. Gross domestic product will expand 0.8 per cent this year, the Organisation for Economic Co-operation and Development has predicted, revised down sharply from the 1.7 per cent growth previously forecast because of the extensive damage from the quake, it said. In 2012, the Paris-based OECD predicted Japan’s economy will expand by 2.3 per cent, buoyed by reconstruction spending.

Explaining its changes, the Martin Currie fund said it will continue to use the MSCI All Country Asia Pacific Index as its benchmark, and fix the Japan element within it at 25 per cent, plus or minus 15 per cent. The Japan weighting will operate between 10 per cent to 40 per cent of the total portfolio, depending on the manager’s prevailing investment outlook.

Among other changes, there will be a more focused portfolio of 55-75 stocks in the fund, which holds a total of £138 million ($226 million) of assets.

Under the reduced Japanese weighting, the board of the fund said its lead manager will be Andrew Graham of Martin Currie. Andrew has managed money in both Japan and Asia and has 23 years’ investment experience. He will be supported by Paul Danes, a Japan specialist with 17 years’ experience. The current lead manager John Millar has been supported by Jason McCay for the past eight years.

“John and Jason are passing lead management responsibilities on to two talented managers, and will continue to be closely involved through their senior roles within Martin Currie,” the fund’s management board said.

The fund has reported a net asset value total return of 11.7 per cent for the 12 months to 28 February 2011, compared to the MSCI All Country Asia Pacific Index return of 11.8 per cent. The company’s share price total return was 17.7 per cent, reflecting a narrowing of the discount over the year.