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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 1.19% in June helped by the downtrend in domestic COVID cases, at least for the majority of the period. Japan maintained a high rate of COVID vaccinations over the period at a little over 1m per day and has now administered 62m doses, enough to have vaccinated 24.5% of the population on a two dose basis. It is now on track to fully vaccinate 10% of the population every 3-4 weeks. It became clear during the month that the Olympics would definitely go ahead however on very restricted terms. Tokyo’s state of emergency restrictions will now extend to August 22nd meaning that the event will play to empty stadiums in Tokyo at least. It was a mixed performance in terms of sector moves; value gave back some of this year’s outperformance relative to growth slipping 1.7% but this still leaves it 12.0% ahead for the year to date. Leading sectors were predominantly economically sensitive including shipping, mining, rubber, oil and autos but that was also true of the worst performing sectors which included steel, non-ferrous metals, brokers, banks and machinery. The Yen weakened further against the US$ slipping from 109.6 to 111.1. Foreign investors were modest net sellers over the period and have also been so over the first six months of the year.

 

Global economic news of note included the results of the US Fed meeting suggesting that the first rate hike might come in 2023 rather than 2024. This initially caused some market weakness but markets recovered in response to more dovish comments from chair Jerome Powell indicating that the Fed had no intention of taking pre-emptive measures. Domestic economic news was mixed indicating both the broad trend towards recovery and the negative impact of the recent surge in virus cases and the actions taken to suppress them. On a positive note the BOJ Tankan business survey showed a +9 point improvement to +14 for current conditions for large manufacturers, the fourth straight quarterly improvement, while for non-manufacturers an improvement of +2 to 1 was recorded, the first positive reading in 5 quarters. One feature that stood out in the survey was robust capital spending plans that bodes well for the future. May industrial production fell sharply by -5.9% MoM underperforming expectations, with the auto sector (-16.6%) hit hard by semiconductor shortages following the fire at the Renesas plant in March. A sharp recovery in activity is however forecast in June. The Economy Watchers Survey showed a sharp improvement in June with current conditions rebounding 9.0 points to 45.4 and the outlook improving by 5.8 to 52.6. One caveat however is that this was taken before the announcement of Tokyo’s fourth state of emergency.

 

The last month has been mixed in terms of global economic news with rising COVID case counts driven by the Delta variant in many regions to be set against continuing underlying improvement in economic activity and steady vaccination progress in the leading industrial economies. We retain a broadly positive view of the global economic outlook and whilst accepting that restrictions put in place to control infections will have a short term negative impact they don’t change the big picture. Current vaccines provide good protection against the various COVID variants and by the late autumn vaccination rates should allow the return of many of the aspects of pre-COVID life. G7 Governments remain supportive of loose and stimulative fiscal policy and central banks including the Fed are keeping their broadly dovish tone for now. Japan has lagged other industrial nations in its vaccine rollout but is now catching up fast. The manufacturing sector in Japan has demonstrated a robust recovery from the COVID shock of a year ago and profitability is benefiting from both recovering demand and the maintenance of many of the cost control measures that helped them weather the storm during 2020. While the non-manufacturing sector remains depressed, conditions should improve markedly in the second half of the fiscal year and many of these companies are also recording impressive cost savings. We remain focused on individual stock attributes and are positioned to benefit from broad economic strengthening; heavily represented in areas of the market with strong overall economic sensitivity such as industrials and IT and underweight the key defensive sectors.

 

In order of size, we are overweight semiconductors & semiconductor equipment, capital goods, retailing, transportation and software & services. We are underweight pharmaceuticals, telecoms, media & entertainment, tech hardware, and real estate. The Topix appears reasonably attractively valued in historical terms, trading on a PBR of 1.30x, a prospective PER of 15.6x 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 3.21% (JPY share class) in June, outperforming Topix which rose by 1.19% (dividends reinvested). Over the second quarter the fund rose by 4.23%, outperforming Topix which fell by 0.33%.

 

The fund’s outperformance of the Topix over the month was driven by stock selection, sector allocation had a negligible impact. The underweight in telecommunication services added value but was offset by the negative impact of the underweight in pharmaceuticals. The position in Mercari, the internet based flea market operator, was a strong contributor as was the medical services business JMDC. In the chemicals area both Mitsubishi Chemical and its subsidiary Nippon Sanso rose over the month helped by hopes for structural reform led by the company’s new President. Hitachi rose reflecting investor interest in prospects for their smart grid business and the Shipping company Nippon Yusen, which continues to benefit from the strength of the container market, also gained. The fund’s component holdings added value with Ibiden and Taiyo Yuden performing well. On the negative side the performance of Neural Pocket was dull.

 

Over the quarter the fund’s outperformance of the Topix was primarily driven by stock selection though sector allocation also had a modest positive impact. The value added in sector allocation was driven by the fund’s overweight in semiconductors and the underweight in telecoms. At the stock level a lot of value was added in capital goods with strong performances shown by Hitachi, Fanuc, Asahi Glass, Marubeni and Minebea Mitsumi. Another area of strength was autos where Yamaha Motor rose strongly on confirmation of its strong cyclical recovery and Toyota performed well helped by its smooth navigation of the global chip shortage. Other names of note include the shipping firm Nippon Yusen and chemical stocks Mitsubishi Chemical and Nippon Sanso. Growth stocks JMDC and Mercari added value however on the negative side the positions in Benext-Yumeshin and Neural Pocket underperformed the market.

 

We bought a position in NEC, funding this through the sale of our shares in software developer NTT Data. NEC shares have fallen sharply post the announcement of full year results that revealed substantial upfront costs as they attempt to win a significant share of the 5G equipment market. We believe the fall in the share price fully discounts these costs while not allowing for the possibility that they will succeed in this regard. We are encouraged by their recent 5G equipment contract wins from Vodaphone and Deutsche Telecom. After a period of strong performance we sold our position in the SPE company Screen Holdings and reinvested it in the construction machinery firm Komatsu. The primary driver for this move was relative valuation with the sharp relative performance differential between the two making the switch very attractive. Komatsu has fallen sharply over the past couple of months even as its business continues to exhibit a steady recovery. It is a well managed business with a strong global franchise. We were active in the components area selling the position in Taiyo Yuden and switching this back into TDK following its recent underperformance. We still like long term prospects for Taiyo Yuden however we are concerned that profitability may be constrained by heavy expansion costs over the next couple of years. TDK looks attractively valued after recent underperformance and we like long term prospects in their core battery and components businesses and expect their sensors and heads operations to recover sharply over the next few years. In chip packaging we retain our position in Shinko but sold our shares in Ibiden after recent strong performance, choosing to reinvest this in the semiconductor maker Renesas. We are encouraged by recent improvements in profitability and consistency here and consider the company to be in a very strong position to take advantage of the current semiconductor shortage to forge new client relationships and expand share. Lastly we purchased a small position in the rail and real estate conglomerate Tokyu which we expect to show a strong recovery in 2022 as COVID restrictions finally ease reflecting strong progress being made in vaccinating the population.


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