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 disappointment of a sluggish April, the Japanese market moved higher again in May. 

In some respects, little seemed to have changed from April. The press was still full of articles talking about the unpopularity of the Suga government, the slow pace of Japan’s vaccine rollout and the public’s opposition to the Olympics. GDP fell in the quarter ended in March. To cap it all, the government announced not one, but two extensions to its state of emergency, which will now run until late June.

Why, then, the rise in the market? Partly because none of the above was surprising. And, whilst Japan’s vaccination programme was slow to start, it has accelerated recently. At the start of May, less than 3% of the population had been vaccinated. By early June 12% had received at least one dose of the vaccine. The GDP numbers may have been disappointing, but the corporate profits for the year to March, which were also announced during the month, were much better than anyone could have foreseen at the start of the fiscal year. 

The Fund outperformed its benchmark in May. Value performed very strongly until the last few days of the month, when growth stocks staged a recovery.

47 of our 50 companies reported full-year results during April and May. All but 5 of them beat their forecast numbers, and, on average, they reported operating profits 12.7% ahead of estimate. 20 companies announced that they would raise their March 2021 dividends above the level previously announced and 8 are buying back shares. 15 have already announced dividend increases for the current year. It was one of our best ever earnings seasons. Moreover, in our post-results meetings with companies, it has become clear that most believe that at least some of last year’s cost cuts can be sustained.
 
Many global investors look at Japan from a top-down perspective and see only the negatives: poor demographics, high fiscal deficits and, latterly, a government, which seemed to be rigid in its response to the pandemic. They make unfavourable comparisons between “old school” Japanese companies such as Toyota, and dynamic competitors, such as Tesla. Few realise that Tesla depends on Japanese technology. Or that Toyota, which produced 18 times as many cars as Tesla last year, has impressive battery technology and has been making money on hybrid vehicles for over 20 years. Japanese companies continue to lead the world in materials and components technology. They are emerging from the pandemic stronger than ever. They are cheap. This is not the time to ignore them.  
 

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.
 

Amongst other characteristics, the Fund promotes environmental and social characteristics and invests in companies that apply good corporate governance.  JOHCM Funds (Ireland) Limited, the Fund’s manager, has therefore categorised the Fund as meeting the provisions set out in Article 8 of EU Regulation 2019/2088 on sustainability-related disclosures in the financial services sector (“SFDR”).  

In order to reduce the adverse environmental impact of the Fund’s portfolio, J O Hambro Capital Management Limited (“Investment Manager”) seeks to avoid investment in sectors that contribute to climate change.  In addition, it seeks to avoid companies which undermine a cohesive and fair society. 

In addition to considering key ESG performance indicators, the Fund applies exclusions to the selection of underlying assets to support the avoidance of harms. The Investment Manager excludes investments in any companies which derive 30% or more of their revenue from:  

•    thermal coal mining; 

•    fossil fuel-based power generation; or 

•    oil and gas (both conventional and unconventional) extraction and production. 

These selection criteria may not be disapplied or overridden by the Investment Manager. 

The team recognises that ESG factors can create risks and opportunities for companies and look for companies who may benefit from this by incorporating ESG factors into valuation and construction. 

In order to measure and monitor the environmental characteristics of the Fund, the Investment Manager will review the carbon footprint of the portfolio and environmental data published by its investee companies.  For the social characteristics of the Fund, the Investment Manager will review whether investee companies have implemented appropriate policies and structures to support sustainable business practices.   

Investee companies must follow good governance practices. This requires investee companies to adhere to minimum standards in various areas including sound management structures, employee relations, remuneration of staff and tax compliance. The Investment Manager is a signatory to the UK Stewardship Code 2012, is requesting to be a signatory to the UK Stewardship Code 2020 (together the “Code”) and is a signatory to the UN Principles for Responsible Investment (the “UNPRI”). As a signatory to the Code and the UNPRI, the good governance practices of investee companies are assessed by the Investment Manager prior to making an investment and periodically thereafter. 

The Fund uses the TOPIX Total Return Index for performance fee calculation purposes only and it is not, nor is it intended to be, aligned and/or consistent with the environmental and social characteristics promoted by the Fund.