The Japanese stock market, benefiting from corporate governance reforms that have led to cash surpluses on balance sheets being unlocked in recent years, has been one of the brighter spots of global financial markets.

Columbia Threadneedle Investments is partnering with UBS Global Wealth Management to launch its Japan Equities strategy.

Run by Daisuke Nomoto, Columbia Threadneedle’s global head of Japanese equities, the strategy aims to generate market-beating returns, or “Alpha,” by choosing from large, medium and small-cap stocks. Nomoto has managed the strategy for more than a decade.

Nomoto has 30 years’ experience in investment and leads a team of five portfolio managers.

The pact with UBS comes at a time when Japanese equities are going through a revival after spending more than two decades in the doldrums. Corporate governance reforms, and the pressure to unlock cash from balance sheets to increase dividends, explains part of the rally. In the past five years, Japanese equities, as measured by MSCI (local currency), have delivered total return per annum of 15.5 per cent, second only to India’s equities, at 16.6 per cent. In a recent briefing for journalists, Pictet Asset Management predicted that these equities, in dollars, would deliver 8.1 per cent returns per annum over the next five years.

Positive
“I am bullish on Japan. I believe it now offers a deep investment universe of high-quality companies that can potentially generate sustainable earnings' growth," Nomoto said. “For me, Japan has five positive ‘lows’, which I do not believe can be found in other equity markets, these are: low leverage in the corporate balance sheets, low interest rates, low valuations, low expectations for reforms, and low retail allocation to equities. All these characteristics are supportive of the price of risk assets. In the current environment, I see Japan as a golden opportunity and believe investors should look to take advantage.”

Jon Allen, head of Asia-Pacific at Columbia Threadneedle Investments, added: “We continue to see strong appetite for our Japan Equities strategy from wholesale and institutional clients, having raised almost $500 million in recent months.”