To provide long-term capital growth through investing in a concentrated portfolio of Japanese stocks, with a bias towards the small and mid-cap areas of the Japanese stock market.

Please note that for capacity reasons the Fund is 'soft-closed' to new direct investors.

After the strong rebound in August, the Japanese market recorded a more muted advance in September. Despite a continued modest rise in Covid-19 infections, there are signs that the Japanese economy is regaining momentum. Industrial production is recovering rapidly and, during the long holiday weekend in late September, many Japanese people travelled to popular tourist spots, taking advantage of the government’s “Go to Travel” subsidies. The Bank of Japan, in its latest monthly commentary, remarked that, “economic activity has resumed gradually and is picking up its pace of growth”.

As expected, Yoshihide Suga won the election to succeed Shinzo Abe as leader of the ruling LDP and assumed the office of Prime Minister in the middle of September. What do we know about Mr Suga? Apart from the fact that he is a workaholic with a sweet tooth and keeps himself in shape by doing 200 sit-ups a day, he has a reputation as a deal-maker, a close interest in policy detail and, judging by early indications, a stronger interest in regulatory reform than his predecessor. He has already set out plans to digitise government services and talked about bringing down Japan’s mobile phone charges and consolidating regional banks. 

The Fund modestly outperformed its benchmark in September. Positive contributors to performance were Toyota Industries, which the market is finally starting to evaluate as a logistics play and technology names such as Taiyo Yuden and JEOL. One of the main negative contributors to performance was our zero weighting in NTT DoCoMo. In late September, NTT announced that it was bidding for its subsidiary, DoCoMo, at a 40% premium. 

We may not have owned DoCoMo, but we do own ten companies which are listed subsidiaries of other listed companies.  Investors have shown interest in some of these names recently and, since the DoCoMo news, sell-side analysts have put out research notes screening for companies likely to be acquired by their parents. Our companies are attractive businesses in their own rights; the prospect of some form of corporate activity is an added bonus. 

At the end of September, the Topix Value index hit a new low relative to the Topix Growth index. The gap between the two indices has never been wider. However, judging by our recent conversations with Japanese companies, the period of maximum uncertainty appears to be behind us. Which means that there is less incentive to pay up for the safety of the overpriced, stable growth names. Japan has sorely tried the patience of value investors, but this is not the time to give up. 

JOHCM/Bloomberg/Tokyo Stock Exchange/Lipper.

Data shown net of fees, net income reinvested. Please note that all fund performance is shown against the TOPIX TR adjusted. Performance of other share classes may vary and is available on request. Where shown, monthly returns table shows compounded discrete monthly performance.

Past performance is no guarantee of future performance. The value of an investment and the income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested. The Funds investment include shares in small-cap companies and these tend to be traded less frequently and in lower volumes than larger companies making them potentially less liquid and more volatile. We recommend that you read the Prospectus and Key Investor Information available from the address overleaf or from our website.