We are delighted to announce that the EI Sturdza Strategic Japan Opportunities Fund was awarded the ‘Best New Launch – Equity’ prize at the 2018 Investors Choice Awards in London on the 13th March 2018.
The award recognises the Fund’s performance since launch, taking into account a number of both qualitative and quantitative criteria and is judged by a panel of independent institutional investors. Further information on the Award Methodology can be found at the bottom of this article.
The Strategic Japan Opportunities Fund, managed by portfolio manager Mitsuhiro Yuasa and his team at Rheos Capital Works Inc., was launched in March 2017 and seeks to generate alpha by outperforming the Benchmark Index over the long term.
The portfolio management team look to invest in companies with consistent revenue / profit growth and strong management regardless of size, history, brand or market capitalisation in the Japanese market, utilising a disciplined bottom-up approach, combined with a macroeconomic view overlay, remaining flexible and dynamic in order to ensure the investment portfolio is positioned so as to take advantage of prevailing and developing market opportunities.
The result of the team’s approach to investing in Japan, is a benchmark agnostic portfolio containing approximately 60 to 90 stocks – reducing stock-specific risk, with a focus on growth companies, irrespective of sector or market capitalisation, with a minimum of +25% to their intrinsic value as per their internal assessment.
Since inception the Fund has returned over 27% to investors on an absolute basis, representing relative performance compared to its benchmark index of +12%.
From a portfolio positioning perspective, the Fund is currently exhibiting a bias towards IT, Industrial and Material stocks, whilst being underweight in Consumer Staples, Health Care and Financials.
Japan’s economy currently ranks third largest globally, in terms of nominal GDP standing at approximately USD 4.4 trillion1. While the Japanese equity market has largely been considered as a laggard since the 1990’s, it should be noted that there have been pockets of the markets particularly in the less covered small and mid cap space, that were able to deliver solid returns to investors.
In this context it is worth considering that Japanese markets were volatile during the period from 2003 to 2012, especially in terms of large cap stocks as represented by the TOPIX Core 30; however on further analysis one will note that during this 10 year period 66% (1705) of Japanese listed companies rose, with an average return of 110%, most of which were Small and Mid Cap growth companies (excluding the financial sector)2.
By contrast, since the introduction of Abenomics, the Japanese equity markets have benefited from a strong rally, with 92% of listed Japanese companies, 3109 (excluding financials) rising, with an average return of these companies of 127%3.
Against this backdrop the team focuses on investments in growing companies in the “New Japan” – new technologies for example which are under-researched / covered by professional investors, which they commonly identify in the small and mid cap space; however it should be noted that the team will invest across the market spectrum should investments be identified that satisfy their established investment criteria.
The below highlights the divergence in the return profile of the various Japanese market cap indices4:
|MSCI Japan Small Cap BGR LCL||22.0||14.3||97.71||72.93||-14.42||10|
|MSCI Japan MId NR LCL||18.4||15.4||97.89||95.82||-22.86||13|
|MSCI Japan NR LCL||17.2||16.2||98.60||105.38||-26.01||15|
|TOPIX TR Index||14.5||13.0||100.00||100.00||-23.86||12|
Mitsuhiro Yuasa, portfolio manager of the Strategic Japan Opportunities Fund, outlines the background to Rheos Capital Works and the partnership with EI Sturdza to form the Fund. Yuasa also provides an overview of their investment process, philosophy and strategy.
If you require any additional information on the Strategic Japan Opportunities Fund, please contact:
Head of Client Relations
+44 1481 722 322
INVESTORS CHOICE AWARD METHODOLOGY
Investors Choice do not believe that risk can simply be defined by realized performance measures such as volatility and that unrealized risk also needs to be taken into account. As such, when defining the nominees and winners of their awards, they collaborate with some of the most established institutional investors around the world to incorporate qualitative criteria into the selection process.
The scoring methodology incorporates a set of qualitative criteria covering the investment process, risk management framework and depth of research team, as well as a set of quantitative performance measures including annualized returns, volatility and maximum drawdown.
The judges review manager profiles on the Allocator portal and independently assign a score from 1 to 10 in each of the qualitative assessment areas for each fund. Average scores for the qualitative and quantitative sets of criteria are then calculated and combined in equal measure to reach the total score. This total score determines the winner in each category.
Further information can be found on the Investors Choice Awards website.
1 Source: International Monetary Fund, World Economic Outlook, April 2017.
2 Source: Bloomberg. All figures are displayed in JPY for the period from 31 December 2002 through to end of December 2012. The financial sector was excluded from analysis, as companies in the sector do not have operating profits, which is the focus of Rheos’ investment strategy.
3 Source: Bloomberg. All figures are displayed in JPY for the period from 31 December 2012 through to end of January 2017. The financial sector was excluded from the analysis, as companies in that sector do not have operating profits, which is the focus of Rheos’ investment strategy.
4 Source: Morningstar Direct. Data for a 5 year period to the end of December 2017. Please note that past performance is not indicative of future returns.
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