Tokyo-based fund managers, Taeko Setashi and Robert Tull, of the Quaero Capital Atlantis Japan Growth Fund, discuss the future of investing in Japan at a media event in London.
Despite a challenging couple of years, Taiko Setashi, lead portfolio manager of Quaero's Atlantis Japan Growth Fund, believes that the sentiment is changing in Japan and there is an appetite for growth stocks.
Outlining the benefits of investing in Japan, Robert Tull, portfolio manager of the fund, said Japan is cheap, relative to other markets. "It has no debt, cash flows are higher than ever before, and it is under-researched, with half the market having no significant sell-side coverage," he said.
Although geopolitical tensions, inflation, central bank policy and the risk of a global recession remain a focus of the markets, there is a growing sense that the peak of inflation has passed. China announcing the end of its zero-Covid policy also supported expectations of a recovering economy in Asia, including Japan.
The Bank of Japan, having surprised the markets in December by widening its yield curve control policy, also kept policy unchanged at its mid-January meeting. It had already diffused a potential crisis of the yen weakening excessively, laying the ground for a smooth transition for the next BoJ governor taking up the position in April, Tull said.
Japan is also at the forefront of high-end technology, with automated production lines. It has a strong semiconductor industry, which is crucial for the manufacture of electric vehicles. It has a big nuclear capability too, making it less susceptible to the energy crisis provoked by the war between Russia and Ukraine.
Atlantis Japan Growth Fund
Launched in 1996, Quaero’s Atlantis Japan Growth Fund is a Guernsey-domiciled, London-listed investment trust.
After a very challenging couple of years, Setashi expects a recovery for selective growth stocks this year. The fund gained 4.03 per cent month-on-month in January, versus the Topix Total Return Index which gained 3.3 per cent month-on-month, and it pays 5.5 per cent annually to investors at the bottom of the cycle, unlike trust peer groups.
The fund aims to achieve long-term capital growth, with emphasis on undervalued, under-researched, fast-growing companies in the small and mid-cap space, which can deliver sustainable earnings growth.
In view of Japan’s ageing population and technology, key areas of focus include healthcare. It also includes infrastructure, which the firm believes is necessary if Japan expects to double tourist arrivals to 40 million by 2030.
Top holdings including software-testing leader Shift, Internet Initiative Japan, semiconductor gas management provider Japan Material and Sumitomo Mitsui Financial Group. The firm has also increased its weight recently in the insurance sector, as a result of adding to its position in Lifenet Insurance, a specialist in providing life insurance online.
Founded in 2005 in Geneva, Quaero Capital LLP is a specialist fund management firm with 2.8 billion euros ($2.92 billion) assets under management.