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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 31/03/2020

Market Review and Outlook

The market recovered by +4.4% in April, rebounding from further weakness at the start of the month when investors reacted to the rapid rise in COVID-19 cases in the US and a resurgence in cases in Tokyo. The market bottomed and sentiment improved with the declaration on April 7th of a state of emergency covering Tokyo and six further prefectures coupled with the announcement of a substantial Y108trn economic support package. The state of emergency was subsequently widened to encompass the entire country on the 16th April. The Bank of Japan added its support at the end of the month by quadrupling its limit on corporate debt purchases to Y20trn and scrapping its upper limit of Y80trn on Government bond purchases. These moves coupled with an easing of the number of new COVID-19 cases in Tokyo helped the market finish the month strongly. While the market recovery was led by many economically sensitive sectors including shipping, electrical appliances, machinery and real estate, some more defensive areas such as services and pharmaceuticals also performed strongly while other cyclicals such as steel, paper and wholesale trade underperformed; so overall a mixed picture. Despite the recovery in sentiment foreign investors remained consistent and heavy sellers of the market amounting to Y1.7trn over the month bringing the YTD total to a very substantial Y8.1trn.

Economic statistics announced over the period not surprisingly point to a sharp slowdown in economic activity. The full impact of this on corporate profits will only become fully apparent with the release of April-June quarter results in a few months’ time however it is at least partly reflected in fiscal 2019 Q4 results. After the release of about 20% of these, Q4 profits have shown a fall of around 35% and for the full fiscal year a decline of 12%. Industrial Production in March fell by 5.2% YoY and -3.7% MoM while machine tool orders fell by 40.7% YoY. The Economy Watchers Survey for March showed current conditions at 15.9 compared to 27.4 and 40.6 respectively in the previous two months while the Nikkei/Markit composite PMI for April was 27.8 compared to 36.2 and 47.0 for the previous two months. None of this is a surprise and the sharp slowdown being witnessed in Japan is broadly mirroring slumping global growth with only China bucking the trend and showing recovery in activity.

While the negative economic impact of the measures being taken globally to control the spread of the virus is dramatic, this is being met with very aggressive stimulus policies designed to support demand through the crisis. Central banks have made substantial increases in their balance sheet commitments and governments have followed this with huge fiscal stimulus packages. The G4 plus Chinese fiscal stimulus is expected to be $3.2trn in 2020. Japan is following this path and alongside the state of emergency has announced a Y108trn headline package incorporating Y39trn in fiscal support measures, including Y100,000 in payments to each Japanese citizen. While there will clearly be a sharp contraction in economic activity, governments are doing all that they can to mitigate this and to promote recovery when the virus can be brought under control.

Actions taken so far this year have reduced the portfolio’s procyclical positioning as we aim to ensure that the fund constituents are in a good position to weather the economic shock of COVID-19 but offer the potential for growth and capital appreciation once the disruption caused by the virus eases. We believe that the crisis will accelerate the secular shift of the economy to ‘on-line’ and that technology investment will follow this. We have chosen to maintain and build exposure to SPE, software & services and technology geared to 5G but reduced exposure to more general economically sensitive stocks and used cash raised to add to stocks in less economically sensitive areas, such as gaming and food & staples retailing, where valuations and prospects for growth look attractive. At the end of April the fund’s significant sector bets in declining order of magnitude are overweight semiconductors, software, technology hardware, media & entertainment, and food & staples retailing, while the fund is underweight capital goods, materials, household & personal products, commercial services and insurance. After the decline so far this year, the valuation of the market looks low on a PBR of 1.04x, prospective PER of 13.9x and dividend yield of 2.59%. Looking through the crisis, prospects for the Japanese market and the fund look strong. Japanese companies start from a position of financial strength to weather this shock and Abe and Kuroda have taken the right choices so far to support the economy. We believe that the companies within the portfolio are well positioned to take advantage of the opportunities that the next year or two will bring.

Fund

The Fund rose by 7.19% (I JPY C share class) in April, outperforming the Topix which rose by 4.35% (dividends reinvested).

The outperformance by the fund of Topix over the month was driven both by stock selection and sector allocation, but with stock selection the slightly greater factor. Value was added by the substantial overweight position held in semiconductors & semiconductor equipment, the overweight held in software & services and the underweights in household & personal products and utilities. Value was lost by being overweight food & staples retailing, being underweight commercial & professional services and through holding a modest amount of cash in a rising market. Stock selection was positive in capital goods, semiconductors & semiconductor equipment, transportation, healthcare equipment and banking. It was negative in telecoms, software & services and in foods. At the stock level the largest positive contributor was the SPE firm Screen Holdings, followed by the semiconductor maker Shinko Electric, Takeda Pharmaceutical, the SPE firm Tokyo Electron, components maker TDK and then pump maker Ebara. Significant negative contributors were the telecoms firm NTT, the convenience store FamilyMart, not owning Softbank Corp, the diversified financial services firm Orix and the holding in the pharmaceutical firm Daiichi Sankyo. Like last month, most stock moves over the period were not in response to specific company news but rather to changes in investor views on the outlook for the virus afflicted economic environment and trading flows.

During April we continued to be active in restructuring the fund portfolio reflecting both our developing understanding of the changed business environment and ongoing market volatility. Unlike February and March however we made no very significant shift in terms of net sector exposures over the period or degree of economic sensitivity of the portfolio. After reviewing prospects within the convenience store sector post results we sold the position in 7&I and switched this into FamilyMart which we prefer as a pure CVS store operation in a tough overall retail environment and one where management has clearly identified areas of cost reduction to drive earnings growth. Within retail we bought a position in the drug store operator Sugi Holdings where we like the company’s focus on prescription pharmaceuticals as a differentiating factor and source of value added within the sector. Whilst broadly maintaining our sector weighting, we sold the position in Bank of Tokyo Mitsubishi and replaced it with Sumitomo Mitsui Financial Group. Recent underperformance of the latter has left it more attractively valued than BOTM and its more limited overseas exposure appears lower risk to us in the current environment. We sold the position in diversified chemical maker JSR after strong recent performance left it looking unattractively valued allowing for its mix of commodity chemical operations as well as its life science and IT chemical areas. We bought a position in the leading air conditioner maker Daikin Industries in reflection of the underlying strength of its market position and business model which we expect to be unaffected by ongoing economic changes. Lastly we bought a small position in the agricultural machinery maker Kubota, this is a well-run business with a good global franchise and while it will be impacted by the economic slowdown this appears to us to be fully discounted in the valuation of the stock after dull share price performance over the last couple of years.


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