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Overview

  • Alma Eikoh Japan Large Cap Equity Fund invests in a concentrated number of Japanese equities selected through a “bottom up” process.
  • The fund is internally managed by Alma Capital Investment Management.

Share Class

NAV

Cumulative Performance (%)

Fund Inception 12 June 2014

Daily Monthly Ytd 1Yr 3Yr 5Yr Incept. Incept.Date

The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance quoted. The investment return and the principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.


Strategy & Manager

Funds Strategy

Investment objective: seek long-term capital growth by investing generally in Japanese large cap stocks (with market capitalisation in excess of US$ 1bn)

  • Investment process: analyse long term company fundamentals through extensive in-house bottom up research with a strong risk management ethos
  • Portfolio of around 25-30 companies which are well managed, profitable and with good prospects. Portfolio managers believe that Cash Flow Return on Investment and value creation are key


Investment Manager

Alma Capital Investment Management “ACIM”

Key Persons

James Pulsford – Fund Manager

James started his career at Morgan Grenfell in 1987, moving to Japan shortly thereafter. During his 12 years in Tokyo, he went on to become the Head of the Small Cap Equity team. James returned to London in 1999 where he managed a number of Japanese large cap products for what became Deutsche Asset Management. As well as various Japanese long only mandates, James has developed the Equilibria Japan long/short strategy at this time. James now has over 30 years’ experience investing in Japan and speaks fluent Japanese. He holds a BA from Oxford University.


Statistics & Commentary

Performance

The performance data shown represents past performance. Past performance is not a guarantee of future results. Current performance may be lower or higher than the performance data quoted. The investment return and the principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.

Portfolio Characteristics

Top 10 Position Details

Investment Manager's Commentary

as of 31/01/2020

Market Review and Outlook

The market slumped by 10.3% in February as investors reacted to news of the spread of COVID-19 outside China with dramatic increases recorded in South Korea and Italy in particular and Japanese media focused on the rapid spread aboard the cruise ship Diamond Princess quarantined in Yokohama. Foreign investors were heavy sellers of the market from mid-month onwards as news concerning the virus deteriorated and sold Y1.4trn over the month. The market decline was led by cyclical sectors as well as transportation, retail and service companies being directly hit by the impact of the virus, the telecom sector outperformed and showed a more moderate decline.

The majority of domestic economic statistics reported over the period had suffered little or no impact from COVID-19 but showed weakness reflecting the negative impact of the rise in the consumption tax from 8% to 10% made in October. Preliminary Q4 GDP showed a seasonally adjusted fall of -6.3% QoQ, much worse than consensus expectations of -3.8%; consumption, housing and business investment all significantly deteriorated. Further evidence of a slowing economy can be seen in employment statistics with the January job offer to applicant ratio falling from 1.57x to 1.49x driven by a sharp fall in new job offers. PMI data for February shows the beginning of the impact of the virus, the flash manufacturing PMI for February showed a fall of 1.2 pts to 47.6 but it is the services PMI that really stands out with a fall of 4.3pts to 46.7 hit by the slump in Chinese tourists.

The potential impact of COVID-19 on the global economy, what policy responses can be made and how effective these may be, now dominate the thinking of global investors dwarfing all other factors. February global PMI’s showed a fall from 50.2 to a post crisis low of 46.7 but this fall only reflects the impact of the virus in China where the PMI collapsed to 35.7 with the effect elsewhere yet to really register. Policy makers stand ready to take supportive action, however the scope for monetary easing is limited and much of the potential stimulatory spending will require an end to viral disruption to be properly effective. BOJ chief Kuroda has announced that he will take action to ensure market stability through money market interventions and asset purchases and has already stepped up the pace of ETF buying. With similar responses being made globally, the probability of systemic crisis appears small but that of a sharp contraction in economic activity in H1 2020 impossible to avoid.

As mentioned earlier, the fund entered this period of crisis with a clear procyclical positioning. At the end of January positions held with a differential of +/-2% cf Topix the portfolio were overweight auto’s, semiconductors, software, tech hardware, real estate, diversified financials and banks while being underweight telecoms, media & entertainment, retailing, food & staples retailing, food & beverages, household goods, healthcare, pharmaceuticals, insurance and capital goods. At the end of February whilst the list of net overweight positions remained similar the underweight positions were very different and consisted of food & staples retailing, household goods, insurance, pharma and capital goods. The underweight in capital goods is now the largest net sector position held in the fund at -9.2% compared to -3.2% at end January. In managing the portfolio and considering individual stocks we have asked ourselves the question, “in a weak economic environment with the strength of any ensuing recovery at present uncertain, how will the business fare and if it is economically sensitive does it have a specific driver to fuel growth over and above the wider economy?”. We have chosen to maintain exposure to SPE, software & services and technology geared to 5G but sharply cut exposure to more general economically sensitive stocks and used cash raised to add to stocks in less economically sensitive areas where valuation and prospects for growth look attractive. This process has continued in March as we seek to maintain a portfolio that can weather the economic shock of COVID-19 but offers the potential for growth and capital appreciation once the market starts to look through the disruption caused by the virus. The valuation of the market now looks low in historical terms on a PBR of 1.07x, prospective PER of 13.3x and dividend yield of 2.66%.

 

 

 

Fund

The Fund declined 10.29% (I JPY C) in February broadly matching the Topix which fell by 10.27% (dividends reinvested).

Stock selection was slightly negative with sector allocation making a minor net contribution. Stock selection was positive in software & services, capital goods, materials, transportation and banks while value was lost in autos, food & beverages, healthcare equipment, telecoms and commercial services.

At the stock level the largest contributor was again the position in IT firm Fujitsu where the stock continued to benefit from positive sentiment following Q3 results. MUFJ Financial Group was also a positive contributor, holding up well during the market sell-off helped by its value characteristics and this was also the driver behind the outperformance of positions held in Mitsubishi Corp and Orix. JSR performed well helped by investor focus on their life science operations. The largest negative contributor to fund performance was the absence of a position in Softbank which rose sharply following the decision to allow the merger of Sprint with T mobile in the US. Among other negative contributors, Yamaha Motor fell following the announcement of duller than expected forecasts for the new fiscal year and Persol also fell on disappointing results. Mitsui Real Estate, Sony and JMDC also underperformed the market but on no notable fundamental news.

We were very active in restructuring the fund portfolio during February as we sought to react to both changes in corporate fundamentals revealed in Q3 results and more importantly the potential impact of the spread of COVID-19 beyond China on prospects for global growth. The fund has been run with a very clear pro-cyclical positioning in recent months and the changes made in February reduced this bet while closely following individual stock fundamentals. The position in Komatsu was sold reflecting our view that ongoing commodity price weakness was likely to result in further declines in mining capital spending and weakness in group revenues. Mitsubishi Chemical was sold after Q3 results revealed an unexpectedly severe decline in margins in several key product groups and with growth set to slow in Asia, prospects for recovery appear bleak. Marubeni was sold reflecting the combination of weak balance sheet and economic gearing that the stock possesses which feels inappropriate in the current environment. The staffing company Persol was sold reflecting our concerns that the company will struggle to turn around its problematic overseas operations in a weakening economic environment and there is a risk that the core domestic business may be impacted by any easing of the employment market. Semiconductor production equipment maker Hitachi Hitech was sold following the announcement of its acquisition by Hitachi and in the same sector we bought a holding in Screen Holdings. This company has a strong position in cleaning equipment which we believe will allow it to earn high margins once current production issues caused by unexpected demand for previous generation equipment from Intel are resolved. We bought Nintendo attracted by the progress the company has made in building up its on-line subscription service, its success in extending the life of the Switch console and its steady progress in developing the exploitation of its rich intellectual property. Rakuten was bought reflecting the healthy underlying growth being shown in both its core on-line mall business and its finance businesses. While earnings are currently depressed by investment in its logistics operations and its entry into the 5G mobile telephony service market, we expect a strong recovery in earnings to become apparent over the next three years. We bought the software development and IT provider NS solutions; this is a profitable and highly cash generative business with a substantial backlog of work helping Japanese corporations modernise their IT systems and move services to the cloud. The stock has underperformed sharply following its peripheral involvement in Net One’s accounting scandal and looks cheap. The fishery company Nippon Suisan has two attractive businesses; its frozen food operations and its highly purified EPA fish oil supplied to the pharmaceutical sector. We expect good growth in these two businesses over the medium term and think the stock looks attractively priced after poor relative performance over the past year. The medical equipment maker Olympus was bought in recognition of the strong prospects for growth that it offers in the Chinese market in its core endoscope business. The company holds a 70% global market share in endoscopes and we expect it to maintain very high double digit margins in this business.


Facts & Documents

Facts

Fund Domicile: Luxembourg

Fund Type: UCITS SICAV

Fund Launch: 12 June 2014

Base Currency: JPY

Depositary, Administrator, Transfert Agent: BNP Paribas Securities Services (LU)

Dealing: Each day with 1-day notice

Cut-off time: 12 pm CET

Management Company: Alma Capital Investment Management (LU)

Investment Manager: Alma Capital Investment Management (LU)

Fund Managers: James Pulsford

Countries where the fund is registered:
Austria, Germany, Italy, Luxembourg, Switzerland, United Kingdom, France, Singapore

Identifiers:

Institutional USD Hedged Capitalisation share class
ISIN: LU1013117160   Ticker: AEJIUHA LX    Launch: 12 Jun 2014

Institutional GBP Hedged Capitalisation share class
ISIN: LU1013116949   Ticker: AEJIGHA LX    Launch: 12 Jun 2014

Institutional EUR Hedged Capitalisation share class
ISIN: LU1013116782   Ticker: AEJIEHA LX    Launch: 10 Dec 2014

Institutional JPY Capitalisation share class
ISIN: LU1013116519   Ticker: AEJPIJA LX    Launch: 10 Dec 2014

Institutional GBP Unhedged Capitalisation share class
ISIN: LU1152097108   Ticker: AEKJEGC LX    Launch: 17 Feb 2015

Institutional EUR Unhedged Distribution share class
ISIN: LU1870374920   Ticker: AEJLIED LX    Launch: 8 Mar 2019

Institutional EUR Unhedged Capitalisation share class
ISIN: LU1870374508   Ticker: AEJLIEC LX    Launch: 4 Feb 2019

Documents

PROSPECTUS
  1. Articles of Association
  2. Prospectus - Other languages available upon request
  3. List of subcustodians
  4. Audited annual report
  5. Semi-annual report
  6. Monthly reports