The RWC Nissay Japan Focus fund has had strong demand from investors, raising $150m over in its first five months. The strategy is one that has shareholder engagement at its heart and closely replicates the strategy of the Japanese Stewardship Fund launched in 2005. Yasu Kinoshita heads up the investment team who work out of Tokyo and are advised by Corinna Arnold and Mike Connors out of RWC in London.
Since 2005 the Japanese Stewardship has seen very strong performance * of 68% over the TOPIX since its inception and more recently returned 21% YTD demonstrating that opportunities to generate returns are still very much on offer in Japan.
Portfolio manager, Yasu Kinoshita comments: “Like other global markets, Japan has been hit by the turmoil in Europe, China’s slowdown and speculation about a US Federal Reserve rate rise. Abenomics, however, especially on the corporate governance front and now the commitment to a steadily lower corporate tax rate, has underpinned the Japanese stock market’s remarkable turnaround over the course of the past two years and promises sustainable positive change.”
The team believes that there will be ongoing volatility in the market in the short-term but that the strategy’s long-term approach of focussing on quality companies that have room for significant further improvement in areas ranging from balance sheet management to corporate communication and, in some cases, the disposal of underperforming subsidiaries, will continue to provide long-term returns.
Kinoshita adds: “Japan still has huge strengths in the B-to-B sector, often in mid-cap suppliers of obscure technology and automation products and, increasingly, of healthcare equipment and supplies. Such companies often have few effective competitors and are seeing strong secular growth in demand in all markets, China included. Demand for these companies’ products has so far proved to be largely immune to macroeconomic slowdowns anywhere. We have no plans to change our strategy because of short-term volatility. Our focus is longer-term returns”
James Tollemache, head of Business Development at RWC, comments: “The demand we have seen for the RWC Nissay Japan Focus Fund has been driven largely by UK and continental European investors, and an increasing amount of global institutional investors given the long-term nature of the investment process. We are limiting the capacity of the UCITS fund in order to create the best possible chance to outperform for our investors.
“The fund is very unusual given its concentrated nature and pure focus on engagement to create shareholder value in a Japanese corporate environment. Although the strategy has been managed in this form since 2005 the opportunity set has been significantly enhanced by the creation of the Japanese Stewardship Code, the launch of the JPX-Nikkei 400 Index and the soon to be approved Japanese Corporate Governance Code. We are in a unique position to offer our clients a strategy that takes advantage of the opportunities in the Japanese corporate landscape to significantly outperform the TOPIX, and continue the stand out performance the strategy has delivered over the past 10 years.”