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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 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 31/05/2021

Market Review and Outlook

The Topix rose by 3.17% in August moving higher with US and European bourses and ahead of Asian markets which turned in a more muted performance depressed by COVID lockdown disruption and China regulatory tightening concerns. Japan’s better performance after weakness in July was helped by the apparent peaking and decline in COVID-19 cases towards the end of the month following the very sharp rise during July and the first half of August. While the latest infection wave peaked at nearly four times the average weekly infection rate of the previous two, the Japanese vaccination effort continues to make good progress with 133m doses having been administered; enough to have fully vaccinated over 40% of the population on a two dose basis, and continuing to run at a pace equivalent to 10% of the population every 3-4 weeks. The Olympics ran smoothly, albeit without spectators, and Japanese athletes performed strongly lifting the country to 3rd in the medal table, improving public perception of the event. Unfortunately this improvement in sentiment didn’t extend to Prime Minister Suga’s approval rating which remained close to 30% and the loss of his favoured candidate in the Yokohama Mayoral election on the 22nd August was a blow to his authority and indicative of his lack of support outside the Diet. There was no overall clear thematic trend within the market with economic sensitives both amongst the sector leaders and laggards over the period. The shipping sector was again the top performer, surging on further strength in container rates. Iron and steel also rose sharply but so did areas like services, foods and pharmaceuticals while laggards included cyclical areas such as oil and paper. Topix Growth outperformed Topix Value by 2.9% unwinding part of the outperformance seen year to date.

 

Economic statistics over the month were again mixed. While it’s clear that COVID-19 infections are disrupting economic production in Asia and there are concerns over slowing growth and regulatory tightening in China, there was little new to suggest that overall economic momentum is cooling sharply either domestically or globally. Japan’s unemployment rate fell from 2.9% to 2.8% in July and the job offers to applicant ratio improved for the second successive month to 1.15. The Economy Watchers Survey showed an improvement in the current index from 45.4 to 47.7 but the outlook slipped back from 52.6 to 47.1. Industrial production fell 1.5% MoM led by the auto sector where semiconductor shortages are restricting production in the first half of the fiscal year. Shortages are also impacting production in some other industries too. The semiconductor shortage is expected to ease during the last quarter of the year allowing production to recover during this period.

 

Domestic politics has taken centre stage as we approach the Lower House election for the Japanese parliament which now looks likely to be held in November rather than October. Ahead of this is a LDP leadership election scheduled for the 29th September and reflecting his persistently low approval rating Prime Minister Suga announced on the 3rd September that he would not be standing for election. He will therefore resign as Prime Minister on the 30th September when his term as LDP President expires. While the possibility that he might lose the LDP election was credited, his withdrawal in advance was unexpected. The leading candidate who had already made clear he would stand against Suga is Fumio Kishida, the former foreign minister. Former internal affairs minister Sanae Takaichi has also declared while the popular Administrative Reform Minister Taro Kono and former LDP secretary General Shigeru Ishiba are considered likely to enter the field among other possibilities. Kono and Kishida are considered the most likely to win at the moment but calling between them is tough with factional politics perhaps favouring Kishida and grass roots popularity Kono. Importantly no candidate represents a complete change in economic policy and it is expected that a significant stimulatory package of around Y30trn may be announced before the country goes to the polls.

 

We retain a broadly positive view of the global economic outlook driven by vaccine facilitated reopening, government stimulus and central bank support. It’s clear however that the narrative is more complicated than this with policymakers needing to consider developing inflationary pressures and the negative impact of disruption caused by new and more infectious COVID-19 variants. We are still overweight areas of the market with economic sensitivity such as IT and industrials and underweight the key defensive sectors however the stock changes we have made this month have reduced the magnitude of these bets and the economic risk implicit in the portfolio. In order of size, we are overweight semiconductors & semiconductor equipment, retailing, transportation, food and capital goods. We are underweight pharmaceuticals, tech hardware, telecoms, media & entertainment, and consumer durables. The Topix appears reasonably attractively valued in historical terms, trading on a PBR of 1.27x, a prospective PER of 14.7x and a dividend yield of 1.98%. Japanese companies remain well capitalised and the very positive trend of improving corporate governance among listed Japanese firms continues to be in place. We expect Japanese firms will benefit strongly from a recovery in earnings in fiscal years 2021 & 2022 and expect sharply improved shareholder returns in response to this.

Fund

The Fund rose by 0.36% (JPY share class) in August, underperforming Topix which rose by 3.17% (dividends reinvested).

 

During the month stock selection was poor and was the major driver of the relative underperformance vs the Topix, sector allocation was marginally negative. The fund’s performance in August ends a record streak of outperformance months and was primarily driven by stock specific news in several of the fund’s holdings. Being underweight Telecommunication Services and overweight Semiconductors & Semiconductor Manufacturing Equipment and Software & Services added value. Underweights in Pharmaceuticals, Technology Hardware & Equipment and commercial & Professional Services detracted as did the overweight in Retailing. Medical data company JMDC, homeware business Lixil and financial conglomerate Orix added the most value at the stock selection level and having a zero weighting in Softbank Group and Nintendo also added value. Showa Denko was a significant detractor of value during the month; the stock fell sharply upon their announcement of an equity raise in order to allow them to invest more aggressively in growth and strengthen their balance sheet. Yamato Holdings detracted from performance after announcing in-line Q1 results with the market likely hoping for another “beat”. BeNext-Yumeshin and Komatsu both detracted value, as did the position in TDK which also announced Q1 results that fell short of analyst estimates.

 

Over the month we made several changes to the portfolio, all of which were a reflection of stock specific bottom up research, but we also made the decision to reduce the economic sensitivity of the portfolio. This is in light of the outlook for the global economic recovery which looks slightly less clear now than it did before as a result of the increased spread of the delta variant of the coronavirus and subsequent disruption. We decided to sell the remainder our position in the equipment manufacturer CKD in order to buy a position in THK which is geared into a similar capex cycle, has significantly underperformed, and shows substantially higher upside. We also sold our position in Hitachi after a strong run over the last year left it looking fairly fully valued. Similarly, we sold our position in Minebea Mitsumi after a very strong patch of performance left it with little upside on our forecasts and valuations. We sold our position in the shipping company Nippon Yusen where the fundamentals of the company have transformed due to the substantial increase in container rates, up 340% on a one year view and at record highs completely unseen in recent history. The stock price itself has increased five-fold over the last year and we believe the risk reward profile for holding the stock over the medium term is no longer attractive as a result. We sold the remainder of our position in the small AI edge-computing company Neural Pocket as the outlook for the timing of one of their solutions becoming a mass market product seems likely to be delayed and the outlook is more uncertain than it was. Finally, we sold our position in industrial gas company Nippon Sanso which has had a good run of performance and consequently shows little upside. We bought a position in noodle maker Nissin Foods which is a high quality well run business where the outlook for their overseas operations, especially in the Americas, has turned around and looks set to add to growth and enhanced profitability. We also bought a position in Olympus which has displayed strong cost control and where margins, especially in the TSD business, now look rather more sustainable; the company retains a healthy medium term growth outlook. We also bought back a position in Yamaha Motor. It seems likely they will continue to enjoy strong conditions in the marine engines business over the medium term as well as benefitting from a strong recovery in demand for motorcycles in emerging markets in 2022; the stock has recently sold off and looks attractively priced in light of this.


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

Sustainability-related disclosures:
Environmental, social and governance (“ESG”) criteria have been integrated in the investment decision-making process. An ESG analysis is conducted for all target companies. This is done prior to any investment, but also on an ongoing basis. In cases where the ESG analysis process flags material sustainability risks for a particular investment, the Investment Manager will not consider making the investment, and will look to divest when such material sustainability risks arise for a particular investment. No index has been designated as a reference benchmark for this sub-fund. Further information can be found in the prospectus of the sub-fund. The extent to which the above-mentioned characteristics are met will be included in the annual report of the fund, as from the first report issued after 1 January 2022.

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